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Taiwan Hon Chuan Enterprise Co., Ltd. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014 and Independent Auditors’ Report
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DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES
The companies required to be included in the consolidated financial statements of affiliates in accordance with
the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated
Financial Statements of Affiliated Enterprises” for the year ended December 31, 2015 are all the same as the
companies required to be included in the consolidated financial statements of parent and subsidiary companies
as provided in International Financial Reporting Standard 10 “Consolidated Financial Statements.” Relevant
information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed
in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a
separate set of consolidated financial statements of affiliates.
Very truly yours,
TAIWAN HON CHUAN ENTERPRISE CO., LTD.
By:
Hung-Chuan Dai
President
March 29, 2016
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INDEPENDENT AUDITORS’ REPORT The Board of Directors and the Stockholders Taiwan Hon Chuan Enterprise Co., Ltd. We have audited the accompanying consolidated balance sheets of Taiwan Hon Chuan Enterprise Co., Ltd. (the “Corporation”) and subsidiaries (collectively referred to as the “Group”) as of December 31, 2015 and 2014 and the related consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits. However, we did not audit the financial statements of PT Hon Chuan Indonesia, Hon Chuan Vietnam Co., Ltd. and Hon Chuan Malaysia Sdn. Bhd. as of and for the years ended December 31, 2015 and 2014. The total assets of the investees were 14.8% (NT$4,304,962 thousand) and 14.0% (NT$4,094,587 thousand) of the consolidated assets as of December 31, 2015 and 2014, respectively. The net sales of the investees were 8.3% (NT$1,378,255 thousand) and 8.1% (NT$1,397,167 thousand) of the consolidated net sales in 2015 and 2014, respectively. These investees’ statements and all information in Note 33 were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these investees, is based solely on the reports of other auditors. We conducted our audits in accordance with the Regulations Governing Auditing and Attestation
of Financial Statements by Certified Public Accountants and auditing standards generally accepted
in the Republic of China. Those rules and standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe that our audits
and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2015 and 2014 and their financial performance and their cash flows for the years ended December 31, 2015 and 2014, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.
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We have also audited the parent company only financial statements of Taiwan Hon Chuan Enterprise Co., Ltd. as of and for the years ended December 31, 2015 and 2014, on which we have issued an unqualified modified report. March 29, 2016
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated
financial position, financial performance and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, procedures and practices to audit such consolidated financial statements are those
generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying
consolidated financial statements have been translated into English from the original Chinese
version prepared and used in the Republic of China. If there is any conflict between the English
version and the original Chinese version or any difference in the interpretation of the two versions,
the Chinese-language independent auditors’ report and consolidated financial statements shall
prevail.
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
December 31
2015 2014
ASSETS Amount % Amount %
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6) $ 2,421,959 8 $ 2,065,813 7
Financial assets at fair value through profit or loss - current (Notes 4 and 7) 19,226 - - -
Debt investments with no active market - current (Notes 4 and 10) 40,440 - - -
Notes receivable from unrelated parties (Note 4) 158,484 1 168,916 1
Trade receivables from unrelated parties (Notes 4 and 11) 2,361,649 8 2,167,663 7
Trade receivables from related parties (Notes 4 and 29) 1,899 - 469 -
Inventories (Notes 4 and 12) 1,749,055 6 1,989,581 7
Other current assets (Notes 16 and 30) 1,314,954 5 1,558,627 5
Total current assets 8,067,666 28 7,951,069 27
NONCURRENT ASSETS
Available for sale financial assets - noncurrent (Notes 4 and 8) 11,250 - 19,340 -
Financial assets measured at cost - noncurrent (Notes 4 and 9) 40,091 - 25,970 -
Debt investment with no active market - noncurrent (Notes 4 and 10) - - 40,592 -
Long-term investments at equity-method (Notes 4 and 14) 32,501 - 45,729 -
Property, plant and equipment (Notes 4, 15 and 30) 18,796,260 65 19,139,083 66
Computer software (Note 4) 11,988 - 15,511 -
Goodwill (Note 4) 64,496 - 62,187 -
Deferred tax assets (Notes 4 and 24) 171,323 1 91,955 -
Prepayments for equipment 1,524,882 5 1,417,944 5
Other noncurrent assets (Note 16) 397,163 1 387,586 2
Total noncurrent assets 21,049,954 72 21,245,897 73
TOTAL $ 29,117,620 100 $ 29,196,966 100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 17 and 30) $ 8,011,602 27 $ 8,515,579 29
Financial liabilities at fair value through profit or loss - current (Notes 4 and 7) - - 11,267 -
Notes payable to unrelated parties 201,358 1 217,023 1
Trade payables to unrelated parties 457,678 2 552,415 2
Current tax liabilities (Notes 4 and 24) 77,709 - 117,638 -
Current portion of long-term liabilities (Notes 4, 17, 18 and 30) 832,147 3 804,404 3
Other current liabilities (Notes 20 and 29) 868,278 3 1,091,642 4
Total current liabilities 10,448,772 36 11,309,968 39
NONCURRENT LIABILITIES
Bonds payable (Notes 4 and 18) - - 558,671 2
Long-term borrowings (Notes 4, 17 and 30) 4,984,285 17 5,035,097 17
Deferred tax liabilities (Notes 4 and 24) 52,869 - 24,283 -
Preferred stock liabilities (Notes 4 and 19) 574,064 2 535,917 2
Net defined benefit liabilities - noncurrent (Notes 4 and 21) 40,300 - 46,482 -
Other noncurrent liabilities (Note 20) 14,333 - 17,158 -
Total noncurrent liabilities 5,665,851 19 6,217,608 21
Total liabilities 16,114,623 55 17,527,576 60
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Common stock 3,098,479 11 2,598,479 9
Capital surplus 5,412,868 19 3,283,868 11
Retained earnings
Legal reserve 1,086,842 4 990,221 3
Special reserve 421,790 1 421,790 2
Unappropriated earnings 3,205,307 11 3,034,967 10
Other equity (444,446) (2) 294,156 1
Treasury shares (835,335) (3) - -
Total equity attributable to owners of the parent 11,945,505 41 10,623,481 36
NON-CONTROLLING INTERESTS 1,057,492 4 1,045,909 4
Total equity 13,002,997 45 11,669,390 40
TOTAL $ 29,117,620 100 $ 29,196,966 100
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ report dated March 29, 2016)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
For the Year Ended December 31
2015 2014
Amount % Amount %
SALES (Notes 4 and 29) $ 16,578,377 100 $ 17,226,474 100
COST OF GOODS SOLD (Notes 4, 12 and 23) 13,512,705 81 14,425,540 84
GROSS PROFIT 3,065,672 19 2,800,934 16
OPERATING EXPENSES (Notes 23 and 29)
Selling and marketing expenses 739,555 5 719,613 4
General and administrative expenses 998,425 6 868,507 5
Research and development expenses 63,577 - 63,281 -
Total operating expenses 1,801,557 11 1,651,401 9
PROFIT FROM OPERATIONS 1,264,115 8 1,149,533 7
NON-OPERATING INCOME AND EXPENSES
Finance costs (Note 23) (237,735) (1) (245,236) (2)
Net foreign exchange gain (loss) (Note 4) (85,678) (1) 134,595 1
Other gains and losses (Notes 4 and 23) 90,381 - 102,292 1
Total non-operating income and expenses (233,032) (2) (8,349) -
PROFIT BEFORE INCOME TAX 1,031,083 6 1,141,184 7
INCOME TAX EXPENSE (Notes 4 and 24) 144,942 1 205,900 1
NET PROFIT FOR THE YEAR 886,141 5 935,284 6
OTHER COMPREHENSIVE INCOME (Note 4)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans (Note 21) (408) - (3,591) -
Income tax relating to components of other
comprehensive income (Note 24) 69 - 611 -
(Continued)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
For the Year Ended December 31
2015 2014
Amount % Amount %
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations $ (862,180) (5) $ 411,954 2
Unrealized gain on available-for-sale financial
assets (7,042) - 6,769 -
Other comprehensive income (loss) for the year,
net of income tax $ (869,561) (5) $ 415,743 2
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR $ 16,580 - $ 1,351,027 8
NET INCOME ATTRIBUTABLE TO:
Owners of the Corporation $ 948,965 6 $ 966,212 5
Non-controlling interests (62,824) (1) (30,928) -
$ 886,141 5 $ 935,284 5
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Corporation $ 210,024 1 $ 1,328,095 8
Non-controlling interests (193,444) (1) 22,932 -
$ 16,580 - $ 1,351,027 8
EARNINGS PER SHARE (Note 25)
Basic $ 3.26 $ 3.72
Diluted $ 3.20 $ 3.62
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ report dated March 29, 2016) (Concluded)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2015 AND 2014
(In Thousands of New Taiwan Dollars)
Equity Attributable to Owners of the Parent
Other Equity
Exchange Unrealized Gain
Differences on (Loss) on
Retained Earnings (Notes 4, 21, 22 and 24) Translating Available- Non-controlling
Share Capital Capital Surplus Unappropriated Foreign for-sale Treasury Share Interests
(Note 22) (Notes 4 and 22) Legal Reserve Special Reserve Earnings Operations Financial Assets (Note 22) Total (Note 13) Total Equity
BALANCE AT JANUARY 1, 2013 $ 2,598,479 $ 3,283,868 $ 879,190 $ 421,790 $ 2,832,386 $ (70,707) $ - $ - $ 9,945,006 $ 999,374 $ 10,944,380
Increase in non-controlling interests - - - - - - - - - 36,324 36,324
Appropriation of 2013 earnings
Legal reserve - - 111,031 - (111,031) - - - - - -
Cash dividends distributed by the Corporation - - - - (649,620) - - - (649,620) - (649,620)
Cash dividends distributed by subsidiaries - - - - - - - - - (12,721) (12,721)
Net profit for the year ended December 31, 2014 - - - - 966,212 - - - 966,212 (30,928) 935,284
Other comprehensive income (loss) for the year ended December 31,
2014, net of income tax - - - - (2,980) 358,094 6,769 - 361,883 53,860 415,743
Total comprehensive income (loss) for the year ended December 31,
2014 - - - - 963,232 358,094 6,769 - 1,328,095 22,932 1,351,027
BALANCE AT DECEMBER 31, 2014 2,598,479 3,283,868 990,221 421,790 3,034,967 287,387 6,769 - 10,623,481 1,045,909 11,669,390
Increase in non-controlling interests - - - - - - - - - 223,727 223,727
Appropriation of 2014 earnings
Legal reserve - - 96,621 - (96,621) - - - - - -
Cash dividends distributed by the Corporation - - - - (681,665) - - - (681,665) - (681,665)
Issue of ordinary shares for cash 500,000 2,095,000 - - - - - - 2,595,000 - 2,595,000
Share-based payment transaction - 34,000 - - - - - - 34,000 - 34,000
Buy-back of ordinary shares - - - - - - - (835,335) (835,335) - (835,335)
Cash dividends distributed by subsidiaries - - - - - - - - - (18,700) (18,700)
Net profit for the year ended December 31, 2015 - - - - 948,965 - - - 948,965 (62,824) 886,141
Other comprehensive income (loss) for the year ended December 31,
2013, net of income tax - - - - (339) (731,560) (7,042) - (738,941) (130,620) (869,561)
Total comprehensive income for the year ended December 31, 2015 - - - - 948,626 (731,560) (7,042) - 210,024 (193,444) 16,580
BALANCE AT DECEMBER 31, 2015 $ 3,098,479 $ 5,412,868 $ 1,086,842 $ 421,790 $ 3,205,307 $ (444,173) $ (273) $ (835,335) $ 11,945,505 $ 1,057,492 $ 13,002,997
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ report dated March 29, 2016)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
For the Year Ended December 31
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax $ 1,031,083 $ 1,141,184
Adjustments for:
Depreciation and amortization expenses 2,026,906 1,882,512
Finance costs 237,735 245,236
Unrealized net loss (gain) on foreign currency exchange 146,332 30,547
Net loss (gain) on fair value change of financial assets and liabilities
designated as at fair value through profit or loss
(62,568) (23,803)
Compensation cost of share-based payment transaction 34,000 -
Loss (gain) on disposal of property, plant and equipment 27,998 (15,123)
Net loss (gain) on disposal of investment (16,461) -
Impairment loss recognized on non-financial assets 15,894 16,342
Impairment loss recognized on property, plant and equipment 13,886 -
Loss (gain) recognized on associates under equity method 13,080 5,716
Impairment loss recognized (reversal of impairment loss) on trade
receivables
12,080 2
Others (446) (1,534)
Net changes in operating assets and liabilities
Financial assets held for trading 32,678 10,393
Notes receivable 9,686 8,753
Trade receivables (214,008) (173,854)
Inventories 394,184 146,694
Other current assets 77,408 (345,945)
Notes payable (15,666) (11,633)
Trade payables (86,575) (87,168)
Other current liabilities (48,860) 98,953
Net defined benefit liabilities (6,590) (6,519)
Cash generated from operations 3,621,776 2,920,753
Interest paid (214,491) (215,143)
Income tax paid (241,401) (211,530)
Net cash generated from operating activities 3,165,884 2,494,080
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (766,310) (3,421,031)
Decrease in prepayments for equipment (1,752,637) (1,124,962)
Proceeds from disposal of property, plant and equipment 91,967 149,403
Proceeds from sale of available-for-sale financial assets 61,686 -
Purchase of available-for-sale financial assets (45,225) (12,124)
Purchase of financial assets measured at cost (15,000) -
Decrease in refundable deposits (1,875) (253)
Proceeds of the return of capital on financial assets measured at cost 879 -
Acquisition of associates - (48,539)
(Continued)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
For the Year Ended December 31
2015 2014
Proceeds from disposal of debt investments with no active market $ - $ 40,000
Other investing activities (36,697) 28,886
Net cash used in investing activities (2,463,212) (4,388,620)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term borrowings (3,758,695) (1,530,306)
Proceeds from long-term borrowings 3,086,000 2,197,029
Proceeds from issue of ordinary shares 2,595,000 -
Proceeds from (repayments of) short-term borrowings (852,335) 2,121,622
Payments for buy-back of ordinary shares (835,335) -
Dividends paid to owners of the Corporation (681,665) (649,620)
Changes in non-controlling interests 223,727 36,324
Payments for increase of interests in subsidiaries (72,751) -
Dividends paid to non-controlling interests (18,700) (12,721)
Repayments of corporate bonds - (424,500)
Net cash generated from (used in) financing activities (314,754) 1,737,828
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES
(31,772) 87,442
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
356,146 (69,270)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
2,065,813 2,135,083
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,421,959 $ 2,065,813
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ report dated March 29, 2016) (Concluded)
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TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
Taiwan Hon Chuan Enterprise Co., Ltd. (the “Corporation”) was incorporated in 1969. It manufactures
and sells various packing materials for the food and beverage industries (such as aluminum closures, plastic
caps, metal caps, labels, bioriented polyolefin shrinkable films, low density polyethylene (LDPE),
shrinkable films, and polyethylene terephthalate (PET) bottles) and automatic sealer machines. It also
manufactures and sells packing materials for electronic parts (such as anti-static sheets or bags), precision
instrument cases, and caps for batteries.
The Corporation became a public company in August 1993 under the approval of the Securities and Futures
Bureau (SFB) under the Financial Supervisory Commission. The Corporation’s shares have been traded
on the Taiwan Stock Exchange since March 2, 2001.
The consolidated financial statements are presented in the Corporation’s functional currency, New Taiwan
dollars.
2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Corporation’s board of directors on March 29,
2016.
3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports
by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS),
International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS
(SIC) endorsed by the FSC
Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC on April 3, 2014, stipulated that the
Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”)
endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of
Financial Reports by Securities Issuers starting January 1, 2015.
Except for the following, the initial application of the amendments to the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version did not have any
material impact on the Group’s accounting policies:
1) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 requires items of other comprehensive income to be grouped into those
items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified
subsequently to profit or loss. Income taxes on related items of other comprehensive income are
grouped on the same basis. Under previous IAS 1, there were no such requirements.
The Group retrospectively applied the above amendments starting in 2015. Items not expected to
be reclassified to profit or loss are remeasurements of the defined benefit plans and the actuarial
gain and loss of associates (and joint ventures) accounted for using the equity method. Items
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expected to be reclassified to profit or loss are the exchange differences on translating foreign
operations, unrealized gains (loss) on available-for-sale financial assets, cash flow hedges, and share
of the other comprehensive income (except the share of the remeasurements of the defined benefit
plans) of associates and joint ventures accounted for using the equity method. The application of
the above amendments did not result in any impact on the net profit for the year, other
comprehensive income for the year (net of income tax), and total comprehensive income for the
year.
2) Revision to IAS 19 “Employee Benefits”
Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair
value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under
previous IAS 19 and accelerates the recognition of past service costs. The revision requires all
remeasurements of the defined benefit plans to be recognized immediately through other
comprehensive income in order for the net pension asset or liability to reflect the full value of the
plan deficit or surplus. Remeasurement of the defined benefit plans is presented separately as
other equity.
Furthermore, the interest cost and expected return on plan assets used in previous IAS 19 were
replaced with a “net interest” amount, which is calculated by applying the discount rate to the net
defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the
presentation of the defined benefit cost, and also includes more extensive disclosures.
b. New IFRSs in issue but not yet endorsed by the FSC
On March 10, 2016, the FSC announced the scope of the 2016 version of IFRSs to be endorsed and will
take effect from January 1, 2017. The scope includes all IFRSs that were issued by the IASB before
January 1, 2016 and have effective dates on or before January 1, 2017, which means the scope excludes
those that are not yet effective as of January 1, 2017 such as IFRS 9 “Financial Instruments” and IFRS
15 “Revenue from Contracts with Customers” and those with undetermined effective date. In addition,
the FSC announced that the Group should apply IFRS 15 starting January 1, 2018. As of the date the
consolidated financial statements were authorized for issue, the FSC has not announced the effective
dates of other new, amended and revised standards and interpretations.
The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the
FSC.
New IFRSs
Effective Date
Announced by IASB (Note 1)
Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2)
Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014
Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3)
IFRS 9 “Financial Instruments” January 1, 2018
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
January 1, 2018
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
To be determined by IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities:
Applying the Consolidation Exception”
January 1, 2016
Amendment to IFRS 11 “Accounting for Acquisitions of Interests in
Joint Operations”
January 1, 2016
IFRS 14 “Regulatory Deferral Accounts” January 1, 2016
IFRS 15 “Revenue from Contracts with Customers” January 1, 2018
(Continued)
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New IFRSs
Effective Date
Announced by IASB (Note 1)
IFRS 16 “Leases” January 1, 2019
Amendment to IAS 1 “Disclosure Initiative” January 1, 2016
Amendment to IAS 7 “Disclosure Initiative” January 1, 2017
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
January 1, 2017
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
January 1, 2016
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
July 1, 2014
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”
January 1, 2014
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
January 1, 2014
IFRIC 21 “Levies” January 1, 2014
(Concluded)
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or
after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition
date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the
remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that
occur in annual periods beginning on or after January 1, 2016; the remaining amendments are
effective for annual periods beginning on or after January 1, 2016.
The initial application of the above New IFRSs, whenever applied, would not have any material impact
on the Group’s accounting policies, except for the following:
IFRS 9 “Financial Instruments”
1) Recognition and measurement of financial assets
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39
“Financial Instruments: Recognition and Measurement” are subsequently measured at amortized
cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated
below.
For the Group’s debt instruments that have contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding, their classification and measurement are
as follows:
a) For debt instruments, if they are held within a business model whose objective is to collect the
contractual cash flows, the financial assets are measured at amortized cost and are assessed for
impairment continuously with impairment loss, if any, recognized in profit or loss. Interest
revenue is recognized in profit or loss by using the effective interest method;
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b) For debt instruments, if they are held within a business model whose objective is achieved by
both the collecting of contractual cash flows and the selling of financial assets, the financial
assets are measured at fair value through other comprehensive income (FVTOCI) and are
assessed for impairment. Interest revenue is recognized in profit or loss by using the effective
interest method, and other gain or loss shall be recognized in other comprehensive income,
except for impairment gains or losses and foreign exchange gains and losses. When the debt
instruments are derecognized or reclassified, the cumulative gain or loss previously recognized
in other comprehensive income is reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss.
However, the Group may make an irrevocable election to present subsequent changes in the fair
value of an equity investment (that is not held for trading) in other comprehensive income, with
only dividend income generally recognized in profit or loss. No subsequent impairment
assessment is required, and the cumulative gain or loss previously recognized in other
comprehensive income cannot be reclassified from equity to profit or loss.
2) The impairment of financial assets
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit
Losses Model”. The credit loss allowance is required for financial assets measured at amortized
cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising
from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and
financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required
for a financial asset if its credit risk has not increased significantly since initial recognition. A loss
allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has
increased significantly since initial recognition and is not low. However, a loss allowance for full
lifetime expected credit losses is required for trade receivables that do not constitute a financing
transaction.
For purchased or originated credit-impaired financial assets, the Group takes into account the
expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate.
Subsequently, any changes in expected losses are recognized as a loss allowance with a
corresponding gain or loss recognized in profit or loss.
Except for the above impact, as of the date the consolidated financial statements were authorized for
issue, the Group is continuously assessing the possible impact that the application of other standards
and interpretations will have on the Group’s financial position and financial performance, and will
disclose the relevant impact when the assessment is completed.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed by the
FSC.
b. Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for
financial instruments that are measured at fair value.
- 14 -
The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value
measurement inputs are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Classification of current and non-current assets and liabilities
Current assets include:
1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within twelve months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period.
Current liabilities include:
1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to
refinance, or to reschedule payments, on a long-term basis is completed after the reporting period
and before the consolidated financial statements are authorized for issue; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least
twelve months after the reporting period. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
Assets and liabilities that are not classified as current are classified as non-current.
d. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Corporation and the
entities controlled by the Corporation (i.e. its subsidiaries).
Income and expenses of subsidiaries acquired or disposed of during the period are included in the
consolidated statement of profit or loss and other comprehensive income from the effective date of
acquisition up to the effective date of disposal, as appropriate.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by the Corporation.
All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.
Total comprehensive income of subsidiaries is attributed to the owners of the Corporation and to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance.
- 15 -
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s
interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in
the subsidiaries. Any difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is recognized directly in equity and
attributed to the owners of the Corporation.
See Note 13, Table 8 and Table 9 for the detailed information of subsidiaries (including the percentage
of ownership and main business).
e. Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange
prevailing at the dates of the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or
translation are recognized in profit or loss in the period in which they arise.
Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated
at the rates prevailing at the date when the fair value was determined. Exchange differences arising on
the retranslation of non-monetary items are included in profit or loss for the period except for exchange
differences arising from the retranslation of non-monetary items in respect of which gains and losses are
recognized directly in other comprehensive income, in which case, the exchange differences are also
recognized directly in other comprehensive income.
Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s
foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in
other countries or currencies used different with the Corporation) are translated into New Taiwan
dollars using exchange rates prevailing at the end of each reporting period. Income and expense items
are translated at the average exchange rates for the period. Exchange differences arising are
recognized in other comprehensive income (attributed to the owners of the Corporation and
non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Corporation’s entire interest in a foreign
operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a
disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation,
or a disposal involving loss of significant influence over an associate that includes a foreign operation),
all of the exchange differences accumulated in equity in respect of that operation attributable to the
owners of the Corporation are reclassified to profit or loss.
In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over
the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to
non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial
disposals, the proportionate share of the accumulated exchange differences recognized in other
comprehensive income is reclassified to profit or loss.
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f. Inventories
Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the
lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be
appropriate to group similar or related items. Net realizable value is the estimated selling price of
inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are
recorded at weighted-average cost on the balance sheet date.
g. Investment in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary
nor an interest in a joint venture.
The results and assets and liabilities of associates are incorporated in these consolidated financial
statements using the equity method of accounting.
Under the equity method, an investment in an associate is initially recognized at cost and adjusted
thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the
associate. The Group also recognizes the changes in the Group’s share of equity of associates
attributable to the Group.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable
assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill,
which is included within the carrying amount of the investment and is not amortized. Any excess of
the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of
acquisition, after reassessment, is recognized immediately in profit or loss.
When the Group subscribes for additional new shares of the associate at a percentage different from its
existing ownership percentage, the resulting carrying amount of the investment differs from the amount
of the Group’s proportionate interest in the associate. The Group records such a difference as an
adjustment to investments with the corresponding amount charged or credited to capital surplus -
changes in the Group’s share of equity of associates. If the Group’s ownership interest is reduced due
to the additional subscription of the new shares of associate, the proportionate amount of the gains or
losses previously recognized in other comprehensive income in relation to that associate is reclassified
to profit or loss on the same basis as would be required if the investee had directly disposed of the
related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital
surplus recognized from investments accounted for by the equity method is insufficient, the shortage is
debited to retained earnings.
When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which
includes any carrying amount of the investment accounted for by the equity method and long-term
interests that, in substance, form part of the Group’s net investment in the associate), the Group
discontinues recognizing its share of further losses. Additional losses and liabilities are recognized
only to the extent that the Group has incurred legal obligations, or constructive obligations, or made
payments on behalf of that associate.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single
asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized
forms part of the carrying amount of the investment. Any reversal of that impairment loss is
recognized to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date on which its investment ceases to be
an associate. Any retained investment is measured at fair value at that date and the fair value is
regarded as its fair value on initial recognition as a financial asset. The difference between the
previous carrying amount of the associate attributable to the retained interest and its fair value is
included in the determination of the gain or loss on disposal of the associate. The Group accounts for
- 17 -
all amounts previously recognized in other comprehensive income in relation to that associate on the
same basis as would be required if that associate had directly disposed of the related assets or liabilities.
If an investment in an associate becomes an investment in a joint venture or an investment in a joint
venture becomes an investment in an associate, the Group continues to apply the equity method and
does not remeasure the retained interest.
When a group entity transacts with its associate, profits and losses resulting from the transactions with
the associate are recognized in the Group’s consolidated financial statements only to the extent of
interests in the associate that are not related to the Group.
h. Property, plant and equipment
Property, plant and equipment are stated at cost, less subsequent accumulated depreciation.
Properties in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs
eligible for capitalization. Such properties are depreciated and classified to the appropriate categories
of property, plant and equipment when completed and ready for intended use.
Depreciation is recognized using the straight-line method. Each significant part is depreciated
separately. The estimated useful lives, residual values and depreciation method are reviewed at the
end of each reporting period, with the effect of any changes in estimate accounted for on a prospective
basis.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in profit or loss.
i. Goodwill
Goodwill arising from the acquisition of a business is carried at cost as established at the date of
acquisition of the business less accumulated impairment loss.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units (or groups of cash-generating units) that is expected to benefit from the synergies of the
combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired, by comparing its carrying amount,
including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a
cash-generating unit was acquired in a business combination during the current annual period, that unit
shall be tested for impairment before the end of the current annual period. If the recoverable amount
of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit
pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized
directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent
periods.
j. Intangible assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost and
subsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and
amortization method are reviewed at the end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are measured at cost less accumulated impairment loss.
- 18 -
On derecognition of an intangible asset, the difference between the net disposal proceeds and the
carrying amount of the asset are recognized in profit or loss.
k. Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets, excluding goodwill, to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss. When it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual
cash-generating units on a reasonable and consistent basis of allocation. If not, Corporate assets are
allocated to the smallest group of cash-generating units.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable
amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting
impairment loss recognized in profit or loss.
When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating
unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying
amount that would have been determined had no impairment loss been recognized for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
l. Financial instruments
Financial assets and financial liabilities are recognized when a group entity becomes a party to the
contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognized immediately in profit or loss.
1) Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade
date basis.
a) Measurement category
Financial assets are classified into the following categories: Financial assets at fair value
through profit or loss, available-for-sale financial assets, and loans and receivables.
i. Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss when the financial asset
is either held for trading or it is designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss are stated at fair value, with any gains or
losses arising on remeasurement recognized in profit or loss. The net gain or loss
recognized in profit or loss incorporates any dividend or interest earned on the financial
asset. Fair value is determined in the manner described in Note 28.
- 19 -
Investments in equity instruments under financial assets at fair value through profit or loss
that do not have a quoted market price in an active market and whose fair value cannot be
reliably measured and derivatives that are linked to and must be settled by delivery of such
unquoted equity instruments are subsequently measured at cost less any identified
impairment loss at the end of each reporting period and are presented in a separate line item
as financial assets carried at cost. If, in a subsequent period, the fair value of the financial
assets can be reliably measured, the financial assets are remeasured at fair value. The
difference between the carrying amount and the fair value is recognized in profit or loss.
ii. Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated as
available-for-sale or are not classified as loans and receivables or financial assets at fair
value through profit or loss.
Available-for-sale financial assets are measured at fair value. Changes in the carrying
amount of available-for-sale monetary financial assets relating to changes in foreign
currency exchange rates, interest income calculated using the effective interest method and
dividends on available-for-sale equity investments are recognized in profit or loss. Other
changes in the carrying amount of available-for-sale financial assets are recognized in other
comprehensive income and will be reclassified to profit or loss when the investment is
disposed of or is determined to be impaired.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the
Group’s right to receive the dividends is established.
Available-for-sale equity investments that do not have a quoted market price in an active
market and whose fair value cannot be reliably measured and derivatives that are linked to
and must be settled by delivery of such unquoted equity investments are measured at cost
less any identified impairment loss at the end of each reporting period and are presented in a
separate line item as financial assets carried at cost. If, in a subsequent period, the fair
value of the financial assets can be reliably measured, the financial assets are remeasured at
fair value. The difference between carrying amount and fair value is recognized in other
comprehensive income on financial assets. Any impairment losses are recognized in profit
and loss.
iii. Loans and receivables
Loans and receivables (including trade receivables, cash and cash equivalent and debt
investments with no active market) are measured at amortized cost using the effective
interest method, less any impairment, except for short-term receivables when the effect of
discounting is immaterial.
Cash equivalent includes time deposits with original maturities within three months from the
date of acquisition, highly liquid, readily convertible to a known amount of cash and be
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.
b) Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators
of impairment at the end of each reporting period. Financial assets are considered to be
impaired when there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows of the
investment have been affected.
- 20 -
For financial assets carried at amortized cost, such as trade receivables assets are assessed for
impairment on a collective basis even if they were assessed not to be impaired individually.
Objective evidence of impairment for a portfolio of receivables could include the Group’s past
experience of collecting payments, an increase in the number of delayed payments in the
portfolio past the average credit period of 90 days, as well as observable changes in national or
local economic conditions that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is
the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after
the impairment was recognized, the previously recognized impairment loss is reversed through
profit or loss to the extent that the carrying amount of the investment at the date the impairment
is reversed does not exceed what the amortized cost would have been had the impairment not
been recognized.
For available-for-sale equity investments, a significant or prolonged decline in the fair value of
the security below its cost is considered to be objective evidence of impairment.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or
losses previously recognized in other comprehensive income are reclassified to profit or loss in
the period.
In respect of available-for-sale equity securities, impairment loss previously recognized in profit
or loss are not reversed through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognized in other comprehensive income. In respect of available-for-sale
debt securities, the impairment loss is subsequently reversed through profit or loss if an increase
in the fair value of the investment can be objectively related to an event occurring after the
recognition of the impairment loss.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the
difference between the asset’s carrying amount and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible,
it is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss except for uncollectible trade receivables that
are written off against the allowance account.
c) Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows
from the asset expire, or when it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or
loss that had been recognized in other comprehensive income is recognized in profit or loss.
- 21 -
2) Equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instruments issued by a group entity are recognized at the proceeds received, net of direct
issue costs.
Repurchase of the Corporation’s own equity instruments is recognized in and deducted directly
from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or
cancellation of the Corporation’s own equity instruments.
3) Financial liabilities
a) Subsequent measurement
Except the following situation, all the financial liabilities are measured at amortized cost using
the effective interest method:
Financial liabilities are classified as at fair value through profit or loss when the financial
liability is either held for trading or it is designated as at fair value through profit or loss.
Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or
losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized
in profit or loss any interest or dividend paid on the financial liability. Fair value is determined
in the manner described in Note 28.
b) Derecognition of financial liabilities
The difference between the carrying amount of the financial liability derecognized and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognized in profit or loss.
4) Convertible bonds and liability component of preferred stock
The component parts of compound instruments (convertible bonds and liability component of
preferred stock) issued by the Group are classified separately as financial liabilities and equity in
accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing
market interest rate for similar non-convertible instruments. This amount is recorded as a liability
on an amortized cost basis using the effective interest method until extinguished upon conversion or
the instrument’s maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and
included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the
conversion option classified as equity will remain in equity until the conversion option is exercised,
in which case, the balance recognized in equity will be transferred to capital surplus - share
premium. When the conversion option remains unexercised at maturity, the balance recognized in
equity will be transferred to capital surplus - share premium.
- 22 -
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and
equity components in proportion to the allocation of the gross proceeds. Transaction costs relating
to the equity component are recognized directly in equity. Transaction costs relating to the
liability component are included in the carrying amount of the liability component.
5) Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest
rate and foreign exchange rate risks, including foreign exchange forward contracts and interest rate
swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into
and are subsequently remeasured to their fair value at the end of each reporting period. The
resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated
and effective as a hedging instrument, in which event the timing of the recognition in profit or loss
depends on the nature of the hedge relationship. When the fair value of derivative financial
instruments is positive, the derivative is recognized as a financial asset; when the fair value of
derivative financial instruments is negative, the derivative is recognized as a financial liability.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they
meet the definition of a derivative, their risks and characteristics are not closely related to those of
the host contracts and the contracts are not measured at fair value through profit or loss.
m. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced
for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and
liability for returns are recognized at the time of sale based on the seller’s reliable estimate of future
returns and based on past experience and other relevant factors.
1) Sale of goods
Revenue from the sale of goods is recognized when all the following conditions are satisfied:
a) The Group has transferred to the buyer the significant risks and rewards of ownership of the
goods;
b) The Group retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Group;
and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.
The Group does not recognize sales revenue on materials delivered to subcontractors because this
delivery does not involve a transfer of risks and rewards of materials ownership.
2) Dividend and interest income
Dividend income from investments is recognized when the shareholder’s right to receive payment
has been established provided that it is probable that the economic benefits will flow to the Group
and the amount of income can be measured reliably.
- 23 -
Interest income from a financial asset is recognized when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable.
n. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
1) The Group as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the
relevant lease.
2) The Group as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term;
contingent rents arising are recognized as an expense in the period in which they are incurred.
o. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets
are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which
they are incurred.
p. Government grants
Government grants are not recognized until there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the
Group recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for
the purpose of giving immediate financial support to the Group with no future related costs are
recognized in profit or loss in the period in which they become receivable.
q. Employee benefits
1) Short-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related service.
2) Retirement benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when
employees have rendered service entitling them to the contributions.
- 24 -
Defined benefit costs (including service cost, net interest and remeasurement) under the defined
benefit retirement benefit plans are determined using the projected unit credit method. Service
cost (including current service cost, and net interest on the net defined benefit liability (asset) are
recognized as employee benefits expense in the period they occur. Remeasurement, comprising
actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other
comprehensive income in the period in which they occur. Remeasurement recognized in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss.
Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined
benefit plan. Any surplus resulting from this calculation is limited to the present value of any
refunds from the plans or reductions in future contributions to the plans.
r. Share-based payment arrangements
Employee share options granted to employee and others providing similar services
The fair value at the grant date of the employee share options is expensed on a straight-line basis over
the vesting period, based on the Group’s best estimates of the number of shares or options that are
expected to ultimately vest, with a corresponding increase in capital surplus - employee share options.
It is recognized as an expense in full at the grant date if vesting immediately.
At the end of each reporting period, the Group revises its estimate of the number of employee share
options expected to vest. The impact of the revision of the original estimates is recognized in profit or
loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the capital surplus - employee share options.
s. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1) Current tax
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided
for as income tax in the year the shareholders approve to retain the earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax
provision.
2) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and
liabilities and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax
assets are generally recognized for all deductible temporary differences, unused loss carry forward
and unused tax credits to the extent that it is probable that taxable profits will be available against
which those deductible temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments
in subsidiaries and associates, and interests in joint arrangements, except where the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits against which to utilize the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
- 25 -
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also
reviewed at the end of each reporting period and recognized to the to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period. The measurement
of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
3) Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are
recognized in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognized in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the
tax effect is included in the accounting for the business combination.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group's accounting policies, management is required to make judgments, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors
that are considered relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.
a. Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated. The value in use calculation requires
management to estimate the future cash flows expected to arise from the cash-generating unit and a
suitable discount rate in order to calculate present value. Where the actual future cash flows are less
than expected, a material impairment loss may arise.
b. Income taxes
The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable
temporary differences will be available in the future. In cases where the actual future profits generated
are less than expected, a material reversal of deferred tax assets may arise, which would be recognized
in profit or loss for the period in which such reversal takes place.
c. Estimated impairment of trade receivables
When there is objective evidence of impairment loss, the Group takes into consideration the estimation
of future cash flows. The amount of the impairment loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows (excluding future credit
- 26 -
losses that have not been incurred) discounted at the financial asset’s original effective interest rate.
Where the actual future cash flows are less than expected, a material impairment loss may arise.
d. Fair value measurements and valuation processes
If some of the Group's assets and liabilities measured at fair value have no quoted prices in active
markets, the Group determines whether to engage third party qualified valuers or self-determine the
appropriate valuation techniques for fair value measurements.
Where Level 1 inputs are not available, the Group or engaged valuers would determine appropriate
inputs by referring to the analyses of the financial position and the operation results of investees, recent
transaction prices, prices of same equity instruments not quoted in active markets, quoted prices of
similar instruments in active markets, valuation multiples of comparable entities. If the actual changes
of inputs in the future differ from expectation, fair value might vary accordingly.
Information about the valuation techniques and inputs used in determining the fair value of various
assets and liabilities is disclosed in note 28.
e. Write-down of inventory
Net realizable value of inventory is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale. The estimation of
net realizable value was based on current market conditions and the historical experience of selling
products of a similar nature. Changes in market conditions may have a material impact on the
estimation of net realizable value.
f. Recognition and measurement of defined benefit plans
Net defined benefit liabilities (assets) and the resulting defined benefit costs under defined benefit
pension plans are calculated using the projected unit credit method. Actuarial assumptions comprise
the discount rate, rate of employee turnover, and future salary increase, etc. Changes in economic
circumstances and market conditions will affect these assumptions and may have a material impact on
the amount of the expense and the liability.
6. CASH AND CASH EQUIVALENTS
December 31
2015 2014
Cash on hand and petty cash $ 4,405 $ 3,682
Checking accounts and demand deposits 1,906,667 1,221,614
Cash equivalent
Time deposits with original maturities less than three months 510,887 840,517
$ 2,421,959 $ 2,065,813
The market rate intervals of cash in bank, at the end of the reporting period were as follows:
December 31
2015 2014
Bank balance 0%-13% 0%-8%
- 27 -
7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT
December 31
2015 2014
Financial assets held for trading
Derivative financial assets
Foreign exchange forward contracts $ 19,226 $ -
Financial liabilities held for trading
Derivative financial liabilities
Interest swap contracts $ - $ 11,267
Outstanding foreign exchange forward contracts were as follows:
Currency Maturity Date Notional Amount
December 31, 2015
Buy USD/EUR 2016.06.17 USD221/EUR200
CNY/USD 2016.03.01 CNY32,395/USD5,000
CNY/USD 2016.03.07 CNY64,800/USD10,000
CNY/USD 2016.09.14 CNY16,325/USD2,500
CNY/USD 2016.09.14 CNY48,975/USD7,500
CNY/USD 2016.09.19 CNY65,200/USD10,000
The Group did not have outstanding foreign exchange forward contracts as of December 31, 2014.
The Group entered into foreign exchange forward contracts to manage exposures due to exchange rate
fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet
the criteria of hedge effectiveness and thus did not qualify for hedge accounting.
Outstanding interest swap contracts as of December 31, 2014 were as follows:
Contract Amount Maturity Date Range of Interest Rates Paid
Range of Interest Rates
Received
US$10,000 2015.09.24 Year 1: 0.30%, year 2: 1.49%,
year 3: 1.90%, year 4: 2.30%,
year 5: 2.45%
USD 3M Libor, Quarterly
fixing and payment
US$10,000 2015.10.07 Year 1: 0.30%, year 2: 1.20%,
year 3: 1.70%, year 4: 2.00%,
year 5: 2.30%
USD 3M Libor, Quarterly
fixing and payment
The Group did not have outstanding interest swap contracts as of December 31, 2015.
The Group entered into interest swap contracts to manage exposures to exchange rate fluctuations of
foreign bank loans. However, those contracts did not meet the criteria of hedge effectiveness and thus did
not qualify for hedge accounting.
- 28 -
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS – NONCURRENT
December 31
2015 2014
Overseas stock of publicly quoted entity $ 11,250 $ 19,340
The Group invested THB13,000 thousand in Ichitan group public company limited (“Ichitan Company”) in
Thailand in April 2015 for cooperating to expand the market in the future.
9. FINANCIAL ASSETS MEASURED AT COST - NONCURRENT
December 31
2015 2014
Domestic unlisted common shares $ 31,446 $ 17,325
Overseas unlisted preferred shares 8,645 8,645
$ 40,091 $ 25,970
Management believed that the fair value of the above unlisted equity investments held by the Group cannot
be reliably measured due to the range of reasonable fair value estimates was so significant; therefore they
were measured at cost less impairment at the end of reporting period.
10. DEBT INVESTMENTS WITH NO ACTIVE MARKET
December 31
2015 2014
Current
Corporate bonds $ 40,440 $ -
Non-Current
Corporate bonds $ $ 40,592
The Group bought US$1,127 thousand of 3-year corporate bonds issued by Garden Fresh (HK) Fruit &
Vegetable Co., Limited (“Garden Fresh”) with a coupon rate of 0% and effective interest rate of 3.57% in
July 2012. The corporate bonds were originally recorded under non-current assets, but were reclassified
as current assets because they will mature within one year from balance sheet date.
11. TRADE RECEIVABLES - NET
December 31
2015 2014
Trade receivables from unrelated parties $ 2,401,963 $ 2,197,473
Less: Allowance for impairment loss (40,314) (29,810)
$ 2,361,649 $ 2,167,663
- 29 -
The average credit period for sales of goods was 30 to 90 days. In determining the recoverability of a
trade receivable, the Group considered any change in the credit quality of the trade receivable since the date
credit was initially granted to the end of the reporting period. Allowance for impairment loss was
recognized against trade receivables over aged 90 days based on estimated irrecoverable amounts
determined by reference to past default experience with the counterparties and an analysis of their current
financial position.
The aging of receivables was as follows:
December 31
2015 2014
Less than 90 days $ 2,351,729 $ 2,098,120 91-180 days 28,110 67,838 More than 181 days 22,124 31,515 $ 2,401,963 $ 2,197,473
The above aging schedule was based on the invoice date.
Movements in the allowance for impairment loss recognized on trade receivables were as follows:
Collectively
Assessed for
Impairment
Balance at January 1, 2014 $ 28,241
Add: Impairment losses recognized on trade receivables 2
Less: Amounts written off as uncollectible (42)
Effect of exchange rate changes 1,609
Balance at December 31, 2014 29,810
Add: Impairment losses recognized on trade receivables 12,080
Effect of exchange rate changes (1,576)
Balance at December 31, 2015 $ 40,314
Age of individually impaired trade receivables was as follows:
December 31
2015 2014
Less than 90 days $ - $ - 91- 180 days 647 1,140 More than 181 days 39,667 28,670
$ 40,314 $ 29,810
The above aging of trade receivables before deducting the allowance for impairment loss was prepared
based on the invoice date.
- 30 -
12. INVENTORIES
December 31
2015 2014
Finished goods $ 446,578 $ 490,596
Work in process 223,907 215,568
Raw materials and supplies 1,031,153 1,272,362
Inventories in transit 47,417 11,055
$ 1,749,055 $ 1,989,581
The cost of inventories recognized as cost of goods sold for the years ended December 31, 2015 and 2014
was $13,512,705 thousand and $14,425,540 thousand, respectively.
The cost of inventories recognized as cost of goods sold for the year ended December 31, 2015 and 2014
included inventory write-downs of $15,894 thousand and $16,342 thousand, respectively.
13. SUBSIDIARIES
a. Subsidiaries included in the consolidated financial statements
% of Ownership
December 31
Investor Investee Main Businesses 2015 2014
The Corporation Hon Chuan Holding Limited
(“Samoa Hon Chuan”)
Overseas reinvested holding
company and international trade
100 100
Samoa Hon Chuan Hon Chuan (China) Holding Co.,
Ltd. (“Hon Chuan China”)
Overseas reinvested holding
company
76.84 76.84
Samoa Hon Chuan HC (Asia) Holding Co., Ltd.
(“Hon Chuan Asia”)
Overseas reinvested holding
company and international trade
100 100
Hon Chuan Technologies (Ningbo)
Co., Ltd. (“Ningbo Hon Chuan”)
Manufacture and sale of packing
materials for electronic
components and caps for
batteries
100 100
Hon Chuan China Kai Gang Industries Limited
(“Kai Gang”)
Overseas reinvested holding
company
100 100
Hon Hsing (Samoa) Holding Limited
(“Samoa Hon Hsing”)
Overseas reinvested holding
company
100 100
Hon Chuan Asia Hon Chuan (Thailand) Co., Ltd.
(“Hon Chuan Thailand”)
Manufacture and sale of plastic
caps and PET bottles
100 100
PT Hon Chuan Indonesia
(“Hon Chuan Indonesia”)
Manufacture and sale of plastic
caps and PET bottles
100 100
Hon Chuan (Myanmar) Co., Ltd.
(“Hon Chuan Myanmar”)
Manufacture and sale of plastic
caps and PET bottles
70 70
Hon Chuan Vietnam Co., Ltd.
(“Hon Chuan Vietnam”)
Manufacture and sale of plastic
caps and PET bottles
100 100
Hon Chuan Malaysia Sdn. Bhd.
(“Hon Chuan Malaysia”)
Manufacture and sale of plastic
caps and PET bottles
100 100
Honly Holding Co., Ltd.
(“Samoa Honly”)
Overseas reinvested holding
company and international trade
60 60
Honly International Co., Ltd.
(“Honly”)
Overseas reinvested holding
company and international trade
49 -
(Continued)
- 31 -
% of Ownership
December 31
Investor Investee Main Businesses 2015 2014
Kai Gang Hon Chuan Enterprise (Suzhou)
Company Limited (“Suzhou Hon
Chuan”)
Manufacture and sale of various
plastic caps, labels and
aluminum closures
100 100
Hon Chuan Food Packing (Qingxin)
Co., Ltd. (“Qingxin Hon Chuan”)
Manufacture and sale of various
plastic caps, labels, PET bottles
and beverage packaging service
100 100
Hon Chuan Food Packing
(Zhangzhou) Co., Ltd.
(“Zhangzhou Hon Chuan”)
Manufacture and sale of PET
bottles and beverage packaging
service
100 100
Hon Chuan Food Packing (Chuzhou)
Co., Ltd. (“Chuzhou Hon Chuan”)
Manufacture and sale of various
plastic caps and PET bottles
100 100
Hon Chuan Food Packing (Xiantao)
Co., Ltd. (“Xiantao Hon Chuan”)
Manufacture and sale of plastic
caps, PET bottles and beverage
packaging service
100 100
Samoa Hon Hsing Suzhou Hongxin Food Packing Co.,
Ltd. (“Suzhou Hongxin”)
Manufacture and sale of plastic
caps, PET bottles and beverage
packaging service
100 100
Hon Chuan Food Packing (Taiyuan)
Co., Ltd. (“Taiyuan Hon Chuan”)
Manufacture and sale of plastic
caps, PET bottles and beverage
packaging service
100 100
Hon Chuan Enterprise (Changsha)
Co., Ltd. (“Changsha Hon Chuan”)
Manufacture and sale of plastic
caps, PET bottles and beverage
packaging service
100 100
Hon Chuan Food Packing (Jinan)
Co., Ltd. (“Jinan Hon Chuan”)
Manufacture and sale of plastic
caps and PET bottles
100 100
Hon Chuan Thailand Hon Chuan FD Packaging Co., Ltd.
(“Hon Fu Thailand”)
Manufacture and sale of plastic
caps, labels and PET bottles
65 65
Samoa Honly Honly Food & Beverage Co., Ltd.
(“Cambodia Honly”)
Beverage packing service 100 100
Suzhou Hongxin Quanhe Investment (Suzhou) Co.,
Ltd. (“Quanhe”)
Equity investment 100 -
Hon Chuan Food Packing (Anyang)
Co., Ltd. (“Anyang Hon Chuan”)
Sale of PE/PET packaging, food
packaging
60 -
Quanhe Anyang Hon Chuan Sale of PE/PET packaging, food
packaging
40 -
(Continued)
The Corporation has the practical ability to direct the relevant activities of Honly; therefore, the
Corporation has control over Honly.
The Group’s ownership in Anyang Hon Chuan increased from 40% to 100% in November 2015, and
Anyang Hon Chuan is included in the consolidated financial statements.
The subsidiaries reported in the consolidated financial statements were based on the financial
statements audited by auditors for the same year.
- 32 -
b. Details of subsidiaries that have material non-controlling interests
Proportion of Ownership and
Voting Rights Held by
Non-controlling Interests
December 31
Name of Subsidiary 2015 2014
Hon Chuan China 23.16% 23.16%
See Table 8 and Table 9 for the information on place of incorporation and principal place of business.
Summarized financial information in respect of each of the Group’s subsidiaries that has material
non-controlling interests is set out below. The summarized financial information below represents
amounts before intragroup eliminations.
Hon Chuan China and Hon Chuan China’s subsidiaries:
December 31
2015 2014
Current assets $ 2,926,462 $ 3,764,063 Non-current assets 10,363,867 10,992,865 Current liabilities (8,277,799) (9,097,006) Non-current liabilities (588,399) (553,075) Equity $ 4,424,131 $ 5,106,847
Equity attributable to:
Owners of the Company $ 3,734,236 $ 4,246,853 Non-controlling interests of Hon Chuan China 689,895 859,994
$ 4,424,131 $ 5,106,847
For the Year Ended December 31
2015 2014
Revenue $ 5,971,664 $ 5,929,054 Loss for the year $ (238,499) $ (164,259) Other comprehensive income for the year (604,950) (25,727) Total comprehensive income for the year $ (843,449) $ (189,986)
Loss attributable to:
Owners of the Company $ (183,263) $ (126,217) Non-controlling interests of Hon Chuan China (55,236) (38,042)
$ (238,499) $ (164,259)
Total comprehensive income attributable to:
Owners of the Company $ (648,107) $ (145,986) Non-controlling interests of Hon Chuan China (195,342) (44,000)
$ (843,449) $ (189,986)
- 33 -
For the Year Ended December 31
2015 2014
Net cash flow from:
Operating activities $ 1,137,248 $ 842,984 Investing activities (666,396) (1,933,885) Financing activities (1,112,339) 985,098
Net cash outflow $ (641,487) $ (105,803)
14. INVESTMENT ACCOUNTED FOR BY THE EQUITY METHOD
December 31
2015 2014
Associates
Unlisted company
Shanghai Danmao Trading Co., Ltd. (“Danmao Company”) $ 32,501 $ 45,729
As the end of the reporting period, the proportion of ownership and voting rights in associates held by the
Group were as follows:
December 31
2015 2014
Name of Associates
Danmao Company 33.33% 33.33%
Refer to Table 9 for the nature of activities, principle place of business and country of incorporation of the
associates.
The summarized financial information below represents amounts shown in the associates’ financial
statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes.
Danmao Company
December 31
2015 2014
Current assets $ 101,082 $ 134,204 Non-current assets 1,830 2,045 Current liabilities (5,409) 939 Equity $ 97,503 $ 137,188
Proportion of the Group’s ownership 33.33% 33.33% Equity attributable to the Group $ 32,501 $ 45,729 Carrying amount $ 32,501 $ 45,729
- 34 -
For the Year Ended December 31
2015 2014
Operating revenue $ 17,574 $ 4,546 Net loss for the year $ (36,903) $ (17,148)
15. PROPERTY, PLANT AND EQUIPMENT
Freehold Land Buildings Equipment Other Equipment
Property in
Construction Total
Cost
Balance at January 1, 2015 $ 668,136 $ 5,262,861 $ 18,387,105 $ 5,088,255 $ 2,275,626 $ 31,681,983
Additions 219 13,733 138,886 129,668 484,820 767,326
Disposals - (23,931 ) (257,305 ) (48,372 ) - (329,608 )
Effect of foreign currency exchange
differences (12,037 ) (120,020 ) (425,204 ) (97,836 ) (50,921 ) (706,018 )
Reclassified 58,798 136,472 2,143,158 633,122 (1,448,218 ) 1,523,332
Balance at December 31, 2015 $ 715,116 $ 5,269,115 $ 19,986,640 $ 5,704,837 $ 1,261,307 $ 32,937,015
Accumulated depreciation
and impairment
Balance at January 1, 2015 $ - $ 1,070,644 $ 8,716,733 $ 2,755,523 $ - $ 12,542,900
Disposals - (3,629 ) (179,539 ) (29,012 ) - (212,180 )
Impairment loss - - - 13,886 - 13,886
Depreciation expense - 209,408 1,325,924 454,189 - 1,989,521
Effect of foreign currency exchange
differences - (22,510 ) (125,389 ) (45,473 ) -
(193,372 )
Balance at December 31, 2015 $ - $ 1,253,913 $ 9,737,729 $ 3,149,113 $ - $ 14,140,755
Carrying amount at January 1, 2015 $ 668,136 $ 4,192,217 $ 9,670,372 $ 2,332,732 $ 2,275,626 $ 19,139,083
Carrying amount at December 31, 2015 $ 715,116 $ 4,015,202 $ 10,248,911 $ 2,555,724 $ 1,261,307 $ 18,796,260
Cost
Balance at January 1, 2014 $ 673,015 $ 4,448,838 $ 16,320,242 $ 4,565,731 $ 1,627,133 $ 27,634,959
Additions - 52,792 297,802 137,583 2,825,243 3,313,420
Disposals (13,985 ) (86,308 ) (456,490 ) (112,197 ) - (668,980 )
Effect of foreign currency exchange
differences 9,106 158,228 730,971 153,370 85,743 1,137,418
Reclassified - 689,311 1,494,580 343,768 (2,262,493 ) 265,166
Balance at December 31, 2014 $ 668,136 $ 5,262,861 $ 18,387,105 $ 5,088,255 $ 2,275,626 $ 31,681,983
Accumulated depreciation
and impairment
Balance at January 1, 2014 $ - $ 834,430 $ 7,466,865 $ 2,370,554 $ - $ 10,671,849
Disposals - (3,482 ) (345,322 ) (90,199 ) - (439,003 )
Depreciation expense - 199,708 1,262,712 392,473 - 1,854,893
Effect of foreign currency exchange
differences -
39,988
332,478
82,695
-
455,161
Balance at December 31, 2014 $ - $ 1,070,644 $ 8,716,733 $ 2,755,523 $ - $ 12,542,900
Carrying amount at January 1, 2014 $ 673,015 $ 3,614,408 $ 8,853,377 $ 2,195,177 $ 1,627,133 $ 16,963,110
Carrying amount at December 31, 2014 $ 668,136 $ 4,192,217 $ 9,670,372 $ 2,332,732 $ 2,275,626 $ 19,139,083
The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated
useful life of the asset:
Building
Main buildings 20-60 years
Electrical power equipment 10-50 years
Other 10-50 years
Machinery equipment 3-20 years
Other assets 2-25 years
- 35 -
Refer to Note 30 for the carrying amount of property, plant and equipment pledged by the group to secure
borrowings granted to the Group.
16. OTHER ASSETS
December 31
2015 2014
Office supplies $ 437,316 $ 369,840
Prepayments for lease 367,407 360,010
Tax refund receivable 294,892 410,105
Prepaid expenses and prepayment for purchases 198,738 380,605
Refundable deposits 36,492 35,416
Restricted assets (Note 30) 32,870 -
Other receivables 17,536 99,474
Others 326,866 290,763
$ 1,712,117 $ 1,946,213
Current $ 1,314,954 $ 1,558,627
Non-current 397,163 387,586
$ 1,712,117 $ 1,946,213
As of December 31, 2015 and 2014, prepaid lease payments mainly include legitimate land use rights of
subsidiaries in Mainland China, Hon Chuan Vietnam, Hon Chuan Myanmar and Hon Chuan Indonesia
which are located in China, Vietnam and Indonesia.
17. BORROWINGS
a. Short-term borrowings
December 31
2015 2014
Unsecured borrowings
Bank loans for working capital $ 7,952,301 $ 7,514,756
Loans for purchasing raw materials 59,301 200,823
Secured borrowings
Collateral loans (Note 30) - 800,000
$ 8,011,602 $ 8,515,579
Rate of interest per annum (%)
Collateral loans - 1.09
Bank loans for working capital 0.97-1.60 0.84-1.51
Loans for purchasing raw materials 0.26-1.81 1.15-1.37
- 36 -
b. Long-term borrowings
December 31
2015 2014
Bank loans for working capital $ 5,246,885 $ 5,240,185
Collateral loans (Note 30) - 599,316
5,246,885 5,839,501
Less: current portion of long-term loans (262,600) (804,404)
$ 4,984,285 $ 5,035,097
Rate of interest per annum (%)
Bank loans for working capital 1.05-1.80 0.97-1.69
Collateral loans - 1.69
The Corporation entered into a secured loan agreement with a syndicate of banks led by Land Bank of
Taiwan Co., Ltd. for repayment of short-term bank loans, procure fund for future investment and
increase operating fund. Under the agreement, the Corporation should maintain certain financial ratios,
as listed below, based on the numbers in the Corporation’s annual financial statements.
1) Current ratio - at least 100% of financial statements.
2) Debt ratio - maximum of 200% of financial statements.
3) Interest coverage ratio - at least 300% of financial statements.
4) Tangible assets - at least $7,000,000 thousand of financial statements.
If the Corporation could not maintain certain financial ratios, it must improve financial ratios and
provide documents certified by the Corporation’s auditor within five months of next year starting May 1.
If the Corporation maintained these financial ratios within the grace period, there will be no violation of
the agreement. However, the Corporation should pay interest at annual rate plus 0.2% from May 1 next
year to the date it actually completed the improvement.
Samoa Hon Chuan entered into a syndicate term loan agreement led by Land Bank of Taiwan Co., Ltd.
for repayment of short-term bank loans, procure fund for future investment fund and increase operating
fund. The Corporation provided financial guarantees for Samoa Hon Chuan in the syndicated term
loan agreement. Under the agreement, the Corporation should maintain some financial ratios, as listed
below, based on the numbers in the Corporation’s consolidated financial statements.
1) Current ratio - at least 80% of consolidated financial statements.
2) Debit ratio - maximum of 200% of consolidated financial statements.
3) Interest coverage ratio - at least 500% of consolidated financial statements.
If the Corporation could not maintain certain financial ratios, it must improve financial ratios and
provide documents certified by the Corporation’s auditor within five months of next year starting April
1. If the Corporation improved these financial ratios within the grace period, there will be no violation
of the agreement. However, the Corporation should pay interest at annual rate plus 0.2% from April 1
next year to the date it actually completed the improvement.
- 37 -
18. BOND PAYABLE
December 31
2015 2014
Unsecured domestic convertible bonds $ 575,500 $ 575,500
Less: Bonds discount (5,953) (16,829)
569,547 558,671
Less: Current portion (569,547) -
Non-current $ - $ 558,671
On July 15, 2011, the Corporation issued 5-year unsecured, zero-coupon convertible bonds with a face
value of $1,000,000 thousand. The effective interest was 1.9467%. Bondholders may request the
Corporation to convert the bonds into the Corporation’s common shares at $96.4 per share between August
16, 2011 and July 15, 2016, (barring the year in which registration of share transfer is suspended) or buy
back the bonds on July 15, 2015 at 100% of their face value.
Between August 16, 2011 and June 5, 2016, if the closing price of the Corporation’s shares reaches 30% of
the conversion price for 30 consecutive trading days or when less than 10% of the bonds had been
redeemed, bought back or converted, the Corporation may redeem the remaining bonds by cash at face
value. Upon maturity, the Corporation should redeem the remaining bonds at 100% of their face value.
As of July 15, 2014, the bondholders had requested the Corporation to redeem the bonds of 4,245 shares
and the Corporation had paid $424,500 thousand for a period of five consecutive trading days. Under the
agreement, the bonds payable were classified as non-current liabilities as of July 15, 2015.
As of December 31, 2015, bonds had not been converted into common shares. As of December 31, 2015,
conversion price was adjusted according to regulated formula and was reset at $71.9 per share.
19. LIABILITY COMPONENT OF PREFERRED STOCKS
December 31
2015 2014
Convertible preferred stock $ 607,263 $ 585,525
Less: liability component of preferred stocks discount (33,199) (49,608)
Non-current $ 574,064 $ 535,917
Hon Chuan China issued participating preferred shares with subscription price of US$18,500 thousand in
August, 2007. As participating and cumulative shares, each preferred share has voting right equivalent to
the number of ordinary share into which it is convertible. The preferred shares would convert into
ordinary shares automatically before initial public offering (IPO) of Hon Chuan China or 10 years after the
preferred shares were issued or, in certain period, should be redeemed by Hon Chuan China.
Dividends on liability component of preferred stock were $35,263 thousand and $32,618 thousand for the
years ended December 31, 2015 and 2014, respectively (Note 23).
- 38 -
20. OTHER LIABILITIES
December 31
2015 2014
Payable for salaries $ 199,567 $ 198,377
Payable for purchase of equipment 130,444 190,919
Payable for bonus to employees 20,241 23,333
Payable for annual leave 18,052 16,783
Deferred revenue 14,335 17,158
Payable for remuneration of directors and supervisors 8,541 8,696
Others 491,431 653,534
$ 882,611 $ 1,108,800
Current $ 868,278 $ 1,091,642
Non-current 14,333 17,158
$ 882,611 $ 1,108,800
21. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Corporation adopted a pension plan under the Labor Pension Act (the “LPA”), which is a
state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to
employees’ individual pension accounts at 6% of monthly salaries and wages.
The employees of the Group’s subsidiary in China, Indonesia, Vietnam, Thailand, Malaysia, Myanmar
and Cambodia are members of a state-managed retirement benefit plan operated by the government of
China, Indonesia, Vietnam, Thailand, Malaysia, Myanmar and Cambodia. The subsidiary is required
to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the
benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the
specified contributions.
b. Defined benefit plans
The defined benefit plan adopted by the Corporation in accordance with the Labor Standards Law is
operated by the government. Pension benefits are calculated on the basis of the length of service and
average monthly salaries of the six months before retirement. The Corporation contribute amounts
equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund
monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s
name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount
of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform
to retirement requirements in the next year, the Group is required to fund the difference in one
appropriation that should be made before the end of March of the next year. The pension fund is
managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to
influence the investment policy and strategy.
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The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:
December 31
2015 2014
Present value of defined benefit obligation $ 148,855 $ 145,927 Fair value of plan assets (108,555) (99,445) Net defined benefit liability $ 40,300 $ 46,482
Movements in net defined benefit liability (asset) were as follows:
Present Value
of the Defined
Benefit
Obligation
Fair Value of
the Plan Assets
Net Defined
Benefit
Liability (Asset)
Balance at January 1, 2014 $ 143,364 $ (93,955) $ 49,409 Service cost
Current service cost 1,786 - 1,786 Net interest expense (income) 2,775 (1,876) 899 Recognized in profit or loss 4,561 (1,876) 2,685 Remeasurement
Return on plan assets (excluding amounts
included in net interest) - (334)
(334) Actuarial (gain) loss - changes in
demographic assumptions (19)
-
(19) Actuarial (gain) loss - changes in financial
assumptions (96)
-
(96) Actuarial (gain) loss - experience
adjustments 4,040
-
4,040 Recognized in other comprehensive income 3,925 (334) 3,591 Contributions from the employer - (9,203) (9,203) Benefits paid (5,923) 5,923 - Balance at December 31, 2014 145,927 (99,445) 46,482 Service cost
Current service cost 1,690 - 1,690 Net interest expense (income) 3,038 (2,148) 890 Recognized in profit or loss 4,728 (2,148) 2,580 Remeasurement
Return on plan assets (excluding amounts
included in net interest) - (496)
(496) Actuarial (gain) loss - changes in
demographic assumptions 985
-
985 Actuarial (gain) loss - changes in financial
assumptions 4,924
-
4,924 Actuarial (gain) loss - experience
adjustments (5,005)
-
(5,005) Recognized in other comprehensive income 904 (496) 408 Contributions from the employer - (9,170) (9,170) Benefits paid (2,704) 2,704 -
Balance at December 31, 2015 $ 148,855 $ (108,555) $ 40,300
- 40 -
Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the
following risks:
1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities,
bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. However, in accordance with relevant regulations, the return generated by
plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the corporate bond interest rate will increase the present value of the
defined benefit obligation; however, this will be partially offset by an increase in the return on the
plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. As such, an increase in the salary of the plan participants will
increase the present value of the defined benefit obligation.
The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were
as follows:
December 31
2015 2014
Discount rate 1.750% 2.125%
Expected rate of salary increase 1.500% 1.500%
If possible reasonable change in each of the significant actuarial assumptions will occur and all other
assumptions will remain constant, the present value of the defined benefit obligation would increase
(decrease) as follows:
December 31
2015 2014
Discount rate(s)
0.25% increase $ (3,337) $ (3,558)
0.25% decrease $ 3,456 $ 3,691
Expected rate(s) of salary increase
0.25% increase $ 3,354 $ 3,604
0.25% decrease $ (3,255) $ (3,491)
The sensitivity analysis presented above may not be representative of the actual change in the present
value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in
isolation of one another as some of the assumptions may be correlated.
December 31
2015 2014
The expected contributions to the plan for the next year $ 9,170 $ 9,204
The average duration of the defined benefit obligation 12 years 13 years
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22. EQUITY
a. Share capital
December 31
2015 2014
Number of shares authorized
(in thousands) 350,000 300,000
Shares authorized $ 3,500,000 $ 3,000,000
Number of shares issued and fully paid (in thousands) 309,848 259,848
Shares issued $ 3,098,479 $ 2,598,479
On October 9, 2014, the Corporation’s board of directors resolved to issue 50,000 thousand ordinary
shares, with a par value of $10 each, for tentative consideration of $52 per share. On October 30, 2014,
the above transaction was approved by the FSC, and on January 7, 2015, the FSC approved to extend
the period of raising capital for 3 months until April 29, 2015. The subscription base date was
determined at April 28, 2015 by the board of directors on March 11, 2015. On April 28, 2015, the
deadline for raising cash capital, the share capital was increased to $2.6 billion.
b. Capital surplus
December 31
2015 2014
Arising from issuance of common shares $ 5,212,598 $ 3,117,598
Arising from employee share options 148,820 114,820
Arising from share warrants 51,450 51,450
$ 5,412,868 $ 3,283,868
The capital surplus from shares issued in excess of par (additional paid-in capital from issuance of
common shares) and donations may be used to offset a deficit; in addition, when the Corporation has no
deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a
certain percentage of the Corporation’s paid-in capital and once a year).
The capital surplus from long-term investments, employee stock options and share warrants may not be
used for any purpose.
c. Appropriation of earnings and dividend policy
The Corporation’s Articles of Incorporation provide that the annual net income after paying income tax
should be used first to make up for prior years’ losses and set aside 10% as a legal reserve. The
residual earnings, net of (i) the remuneration of all directors and supervisors of up to 3%; (ii) employee
bonus of at least 1%; and (iii) special reserve, if necessary, will be distributed as dividends; (iv) the
remaining is stockholder bonus distributed in proportion to owned shares.
Under the dividend policy in the Articles of Incorporation, at least 50% of dividends paid or distributed
should be in the form of stock during the Corporation’s growth stage. When the Group reaches mature
stage, the percentage of cash dividends should be at least 50% of the total dividends.
In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and
bonuses are limited to shareholders and do not include employees. The consequential amendments to
the Corporation’s Articles of Incorporation had been proposed by the Corporation’s board of directors
on November 12, 2015 and are subject to the resolution of the shareholders in their meeting to be held
on June 22, 2016. For information about the accrual basis of the employees’ compensation and
- 42 -
remuneration to directors and supervisors and the actual appropriations, please refer to c. Employee
benefits expense in Note 23.
Under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and
the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of
IFRSs”, the Corporation should appropriate or reverse to a special reserve. Any special reserve
appropriated may be reversed to the extent that the net debit balance reverses and thereafter distributed.
Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Corporation’s
capital surplus. Legal reserve may be used to offset deficit. If the Corporation has no deficit and the
legal reserve has exceeded 25% of the Corporation’s capital surplus, the excess may be transferred to
capital or distributed in cash.
Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax
credit equal to their proportionate share of the income tax paid by the Corporation.
The appropriations of earnings for 2014 and 2013 had been approved in the shareholders’ meetings on
June 2015 and 2014, respectively. The appropriations and dividends per share were as follows:
Dividends Per Share
(NT$)
Appropriation of Earnings For the Year Ended
For the Year Ended December 31 December 31
2014 2013 2014 2013
Legal reserve $ 96,621 $ 111,031
Cash dividends 681,665 649,620 $ 2.2 $ 2.5
The appropriations of earnings for 2015 had been proposed by the Corporation’s board of directors on
March 29, 2016. The appropriations and dividends per share were as follows:
Appropriation
of Earnings
Dividends Per
Share (NT$)
Legal reserve $ 94,896
Special reserve 22,656
Cash dividends 585,758 $ 2
The appropriations of earnings for 2015 are subject to the resolution of the shareholders’ meeting to be
held on June 22, 2016.
d. Special reserves
The increase in retained earnings that resulted from all IFRSs adjustments was not enough for this
appropriation; therefore, the Corporation appropriated to the special reserve an amount of $352,668
thousand, the increase in retained earnings that resulted from all IFRSs adjustments on transitions to
IFRSs.
- 43 -
e. Treasury shares
Purpose of Buy-Back
Shares
Cancelled
(In Thousands
of Shares)
Number of shares at January 1, 2015 - Increase during the year 16,969 Decrease during the year - Number of shares at December 31, 2015 16,969
Under the Securities and Exchange Act, the Corporation shall neither pledge treasury shares nor
exercise shareholders’ rights on these shares, such as rights to dividends and to vote. The
Corporation’s board of directors proposed February 4, 2016 to be the date for cancellation of treasury
shares and also the base date of capital reduction.
23. NET PROFIT FROM CONTINUING OPERATIONS
a. Other gains and losses
For the Year Ended December 31
2015 2014
Gain on valuation of financial assets $ 62,568 $ 23,803
Interest income 31,271 44,369
Gain (loss) on disposal of property, plant and equipment (27,998) 15,123
Gain on disposal of investments 16,461 -
Loss recognized on associates under equity method (13,080) (5,716)
Miscellaneous income 21,159 24,713
$ 90,381 $ 102,292
b. Finance costs
For the Year Ended December 31
2015 2014
Interest on bank $ 191,596 $ 197,816
Interest on convertible preferred stock (Note 19) 35,263 32,618
Interest on convertible bonds 10,876 14,802
$ 237,735 $ 245,236
- 44 -
c. Employee benefits expense, depreciation and amortization expenses
For the Year Ended December 31
2015 2014
Operating
Costs
Operating
Expenses Total
Operating
Costs
Operating
Expenses Total
Employee benefits expense
Payroll expense $ 1,086,885 $ 489,212 $ 1,576,097 $ 1,048,330 $ 393,736 $ 1,442,066
Labor and health
insurance expense
43,652
17,663 61,315
43,373
16,667 60,040
Pension expense 22,922 68,441 91,363 22,029 56,780 78,809
Other employee benefits
expense
35,315
66,755 102,070
35,105
66,703 101,808
Depreciation expenses 1,861,429 128,092 1,989,521 1,745,643 109,250 1,854,893
Amortization expenses 7,760 29,625 37,385 6,159 21,460 27,619
The existing Articles (2014) of Incorporation of the Corporation stipulate to distribute bonus to
employees and remuneration to directors and supervisors at the rates no less than 1% and no higher than
3%, respectively, of net income (net of the bonus and remuneration). For the year ended December 31,
2014, the bonus to employees and the remuneration to directors and supervisors were $23,333 thousand
and $8,696 thousand, respectively, representing 2.68% and 1%, respectively, of the base net income.
In compliance with the Company Act as amended in May 2015, the Corporation proposed amendments
to its Articles of Incorporation to distribute employees’ compensation and remuneration to directors and
supervisors at the rates no less than 1% and no higher than 3%, respectively, of net profit before income
tax, employees’ compensation, and remuneration to directors and supervisors. For the year ended
December 31, 2015, the employees’ compensation and the remuneration to directors and supervisors
were $20,241 thousand and $8,541 thousand, respectively, representing 1.80% and 0.76%, respectively,
of the base net profit. The employees’ compensation and remuneration to directors and supervisors in
cash for the year ended December 31, 2015 have been approved by the Corporation’s board of directors
on March 29, 2016 and are subject to the resolution and adoption of the amendments to the
Corporation’s Articles of Incorporation by the shareholders in their meeting to be held on June 22, 2016,
and in addition thereto a report of such distribution shall be submitted to the shareholders' meeting.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual consolidated financial statements are authorized for issue are
adjusted in the year the bonus and remuneration were recognized. If there is a change in the proposed
amounts after the annual consolidated financial statements were authorized for issue, the differences are
recorded as a change in accounting estimate.
The bonuses to employees and remuneration to directors and supervisors for 2014 and 2013 which have
been approved in the shareholders’ meetings on June, 2015 and 2014, respectively, were as follows:
For the Year Ended December 31
Cash Dividends 2014 2013
Bonus to employees $ 23,333 $ 23,391
Remuneration of directors and supervisors 8,696 9,993
There was no difference between the amounts of the bonus to employees and the remuneration to
directors and supervisors proposed by the board of directors and approved in the shareholders’ meetings
on June, 2015 and 2014 and the amounts recognized in the consolidated financial statements for the
years ended December 31, 2014 and 2013, respectively.
- 45 -
Information on the employees’ compensation and remuneration to directors and supervisors resolved by
the Corporation’s board of directors in 2016 and bonus to employees, directors and supervisors resolved
by the shareholders' meeting in 2015 and 2014 are available on the Market Observation Post System
website of the Taiwan Stock Exchange.
24. TAXES
a. Major components of tax expense recognized in profit or loss
The major components of tax expense were as follows:
For the Year Ended December 31
2015 2014
Current tax
In respect of the current year $ 175,115 $ 192,598
Income tax expense of unappropriated earnings 18,494 34,897
In respect of prior periods 2,046 7,624
Deferred tax
In respect of the current year (50,713) (29,219)
Income tax expense recognized in profit or loss $ 144,942 $ 205,900
A reconciliation of accounting profit and income tax expenses is as follows:
For the Year Ended December 31
2015 2014
Income tax expense calculated at the statutory rate $ 145,379 $ 201,295
Nondeductible expenses in determining taxable income 786 4,106
Permanent differences-others (30,651) (34,590)
Tax-exempt income 8,888 (7,432)
Additional income tax on unappropriated earnings 18,494 34,897
Adjustments for prior year’s tax 2,046 7,624
Income tax expense recognized in profit or loss $ 144,942 $ 205,900
The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in ROC. Tax
rates used by other group entities operating in other jurisdictions are based on the tax laws in those
jurisdictions.
As the status of 2016 appropriations of earnings is uncertain, the potential income tax consequences of
2015 unappropriated earnings are not reliably determinable.
- 46 -
b. Deferred tax assets and liabilities
For the Year Ended December 31, 2015
Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Closing
Balance
Deferred Tax Assets
Temporary differences
Accrued expenses $ 14,719 $ (14,719) $ - $ - Inventories 4,824 2,467 - 7,291 Defined benefit obligation 8,759 (500) 69 8,328 Other (8,212) 27,113 - 18,901
Tax losses 71,865 64,938 - 136,803 $ 91,955 $ 79,299 $ 69 $ 171,323 Deferred tax liabilities Temporary differences
Reserve for land value
increment tax $ 24,283 $ - $ - $ 24,283 Others - 28,586 - 28,586 $ 24,283 $ 28,586 $ - $ 52,869
For the Year Ended December 31, 2014
Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Closing
Balance
Deferred Tax Assets
Temporary differences
Accrued expenses $ 9,361 $ 5,358 $ - $ 14,719
Inventories 311 4,513 - 4,824
Defined benefit obligation 9,080 (932) 611 8,759
Other 6,216 (14,428) - (8,212)
Tax losses 37,315 34,550 - 71,865 $ 62,283 $ 29,061 $ 611 $ 91,955 Deferred tax liabilities Temporary differences
Reserve for land value
increment tax $ 24,283 $ - $ - $ 24,283 Others 158 (158) - - $ 24,441 $ (158) $ - $ 24,283
- 47 -
c. The aggregate amount of temporary difference associated with investments for which deferred tax
liabilities have not been recognized
As of December 31, 2015 and 2014, the taxable temporary differences associated with investment in
subsidiaries for which no deferred tax liabilities have been recognized were $233,932 thousand and
$328,716 thousand, respectively.
d. Information about unused loss carry-forward and tax-exemption
As of December 31, 2015, the approved tax-exempt expansion projects were as follows:
Expansion Projects Tax-exempt Period
Capitalization of earnings (stock dividend) in 2008 and cash
funded expansion in 2009
December 2013 to December 2017
As of December 31, 2015 under the local regulations of Qingxin Hon Chuan, Suzhou Hon Chuan,
Suzhou Hongxin, Xiantao Hon Chuan and Chuzhou Hon Chuan, their loss carryforwards may be offset
against future taxable income.
e. Integrated income tax
December 31
2015 2014
Unappropriated earnings
Unappropriated earnings generated before January 1, 1998 $ 100,487 $ 100,487
Unappropriated earnings generated on and after January 1,
1998
3,104,820
2,934,480
$ 3,205,307 $ 3,034,967
Imputation credits accounts $ 397,541 $ 338,361
For the Year Ended December 31
2015
(Expected) 2014
(Actual)
Creditable ratio for distribution of earnings 15.26% 14.95%
f. Income tax assessments
Income tax returns of the Corporation through 2013 have been examined and cleared by the tax
authorities.
- 48 -
25. EARNINGS PER SHARE
Net profit
attributable to Number of Earnings Per
owner of the Shares Share
Corporation (In Thousands) (NT$)
For the year ended December 31, 2015
Basic $ 948,965 290,687 $ 3.26
Dilutive effects - employees’ compensation or
bonus to employees -
625
Domestic convertible bonus 9,027 8,004
Dilutive $ 957,992 299,316 $ 3.20
For the year ended December 31, 2014
Basic $ 966,212 259,848 $ 3.72
Dilutive effects - bonus issue to employees - 590
Domestic convertible bonus 12,286 10,119
Dilutive $ 978,498 270,557 $ 3.62
Since the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Group
assumed the entire amount of the compensation or bonus will be settled in shares and the resulting potential
shares were included in the weighted average number of shares outstanding used in the computation of
diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included
in the computation of diluted earnings per share until the shareholders resolve the number of shares to be
distributed to employees at their meeting in the following year.
26. OPERATING LEASE ARRANGEMENTS
Operating leases relate to leases of land and plant with lease terms between 5 and 10 years. The Group
does not have a bargain purchase option to acquire the leased land and plant at the expiry of the lease
periods.
The future minimum lease payments of non-cancellable operating lease commitments were as follows:
December 31
2015 2014
Not later than 1 year $ 49,213 $ 50,842
Later than 1 year and not later than 5 years 125,802 125,415
Later than 5 years 67,289 90,482
$ 242,304 $ 266,739
27. CAPITAL MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as going
concerns while maximizing the return to stakeholders through the optimization of the debt and equity
balance.
- 49 -
The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and
equity attributable to owners of the Corporation (comprising issued capital, reserves, retained earnings and
other equity).
Key management personnel of the Group review the capital structure on a quarterly basis. As part of this
review, the key management personnel consider the cost of capital and the risks associated with each class
of capital. Based on recommendations of the key management personnel, in order to balance the overall
capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new
shares issued or repurchased, and/or the amount of new debt issued or existing debt redeemed.
28. FINANCIAL INSTRUMENTS
a. Fair value of financial instruments that are measured at fair value on a recurring basis
1) Fair value hierarchy
Level 1 Level 2 Total
December 31, 2015
Available-for-sale financial assets
overseas stock of publicly quoted entity $ 11,250 $ - $ 11,250
Financial assets at fair value through
profit or loss (FVTPL)
Foreign exchange forward contracts $ - $ 19,226 $ 19,226
December 31, 2014
Available-for-sale financial assets
overseas stock of publicly quoted entity $ 19,340 $ - $ 19,340
Financial liabilities at FVTPL
Interest swap contracts $ - $ 11,267 $ 11,267
There were no transfers between Level 1 and 2 in the current and prior periods.
2) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value
measurement
Financial Instruments Valuation Techniques and Inputs
Derivatives - foreign currency
forward contracts
Discounted cash flow.
Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period and contract
forward rates, discounted at a rate that reflects the credit risk
of various counterparties.
Derivatives - interest swap
contracts
Discounted cash flow.
Future cash flows are estimated based on observable interest
exchange rates at the end of the reporting period and contract
interest rates, discounted at a rate that reflects the credit risk
of various counterparties.
- 50 -
b. Categories of financial instruments
December 31
2015 2014
Financial assets
FVTPL $ 19,226 $ -
Available-for-sale financial assets 11,250 19,340
Loans and receivables
Cash and cash equivalents 2,421,959 2,065,813
Financial assets measured at cost 40,091 25,970
Debt investments with no active market 40,440 40,592
Notes receivable and trade receivable 2,522,032 2,337,048
Financial liabilities
FVTPL - 11,267
Amortized cost
Short-term borrowings 8,011,602 8,515,579
Notes payable and trade payable 659,036 769,438
Bonds payable (including current portion) 569,547 558,671
Long-term borrowing (including current portion) 5,246,885 5,839,501
Preferred stock liabilities 574,064 535,917
c. Financial risk management objectives
The Group's major financial instruments included equity and debt investments, trade receivable, trade
payables, bonds payable, borrowings and preferred stock liabilities. The Group's Corporate Treasury
function manages the financial risks relating to the operations of the Group through internal risk reports
which analyze exposures by degree and magnitude of risks. These risks include market risk (including
currency risk and interest rate risk), credit risk and liquidity risk.
The Group’s Corporate Treasury function evaluates quarterly if the use of financial derivatives is
governed by the Group’s policies approved by the board of directors. Compliance with policies and
exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter
into or trade financial instruments, including derivative financial instruments, for speculative purposes.
1) Market risk
The Group’s activities exposed it primarily to the financial risks of changes in foreign currency
exchange rates and interest rates. The Group entered into a variety of derivative financial
instruments to manage its exposure to foreign currency risk and interest rate risk. There had been
no change to the Group’s exposure to market risks or the manner in which these risks were managed
and measured.
Foreign currency risk
The Group and several subsidiaries of the Corporation had foreign currency sales and purchases,
which exposed the Group to foreign currency risk. Exchange rate exposures were managed within
approved policy parameters utilizing forward foreign exchange contracts. The use of financial
derivatives would reduce the influence of foreign exchange risk but could not completely eliminate
the risk.
- 51 -
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary
liabilities (including those eliminated on consolidation) at the end of the reporting period were as
follows:
December 31
2015 2014
Assets
USD $ 32,790 $ 18,039
EUR 1,261 162
Liabilities
USD 89,626 114,039
EUR 2,663 11,946
The Group was mainly exposed to the USD and EUR.
The Group’s sensitivity to a 1% increase and decrease in NTD (the functional currency) against the
relevant foreign currencies represents management’s assessment of the reasonably possible change
in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency
denominated monetary items. The sensitivity analysis included external borrowings as well as
loans to foreign operations within the Group where the denomination of the loan is in a currency
other than the functional currency of the lender or the borrower. Assuming a 1% movement in the
levels of the NTD against the USD, the pre-tax profit for the years ended December 31, 2015 and
2014 would have changed by decreasing $18,739 thousand and increasing $30,458 thousand,
respectively. Assuming a 1% movement in the levels of the NTD against the EUR, losses before
income tax for the years ended December 31, 2015 and 2014 would have changed by decreasing
$503 thousand and increasing $4,533 thousand, respectively.
Interest rate risk
The carrying amount of the Group's financial assets and financial liabilities with exposure to interest
rates at the end of the reporting period were as follows:
December 31
2015 2014
Fair value interest rate risk
Financial assets $ 40,440 $ 40,592
Financial liabilities 1,143,611 1,094,588
Cash flow interest rate risk
Financial liabilities 13,258,487 14,355,080
The Group was exposed to fair value interest rate risk in relation to fixed-rate bank borrowings. In
order to achieve this result, the Group entered into interest rate swaps to hedge its exposures to
changes in fair values of the borrowings.
The sensitivity analyses below were determined based on the Group’s exposure to interest rates for
non-derivative instruments at the end of the reporting period. For floating rate liabilities, the
analysis was prepared assuming the amount of the liability outstanding at the end of the reporting
period was outstanding for the whole year. A 0.125% increase or decrease was used when
reporting interest rate risk internally to key management personnel and represents management's
assessment of the reasonably possible change in interest rates.
- 52 -
If interest rates had been raised by 0.125% higher and all other variables were held constant, the
Group’s pre-tax profit for the year ended December 31, 2015 and 2014 would decrease by $17,708
thousand and $16,672 thousand, respectively.
2) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in
financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure
to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation
by the counterparties and financial guarantees provided by the Group is arising from:
The carrying amount of the respective recognized financial assets as stated in the balance sheets;
and
The amount of contingent liabilities in relation to financial guarantee issued by the Group.
In order to minimize credit risk, the management of the Group has delegated a team responsible for
determination of credit limits, credit approvals and other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable
amount of each individual trade debt at the end of the reporting period to ensure that adequate
impairment losses are made for irrecoverable amounts. In this regard, the directors of the
Corporation consider that the Group’s credit risk was significantly reduced.
Trade receivables consisted of a large number of customers, spread across diverse industries and
geographical areas. On-going credit evaluation is performed on the financial condition of trade
receivables. The Group’s concentrations of credit risk regarding top 5 customers were 52% and
47% in total trade receivables as of December 31, 2015 and 2014, respectively. No other
concentration of credit risk was observed.
3) Liquidity risk
The Group manages liquidity risk by monitoring and maintaining a level of cash and cash
equivalents deemed adequate to finance the Group’s operations and mitigate the effects of
fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings
and ensures compliance with loan covenants.
The Group relies on bank borrowings as a significant source of liquidity. As of December 31,
2015 and 2014, the Corporation had available unutilized short-term bank loan facilities of
$6,805,794 thousand and $4,764,741 thousand, respectively.
The following table details the Group’s remaining contractual maturity for its non-derivative
financial liabilities with agreed repayment periods. The tables had been drawn up based on the
undiscounted cash flows of financial liabilities from the earliest date on which the Group can be
required to pay.
- 53 -
Less Than
1 Year 1-5 Years Total
December 31, 2015
Non-derivative financial liabilities
Borrowings $ 8,274,202 $ 4,984,285 $ 13,258,487
Non-interest bearing liabilities 659,036 - 659,036
Bonds payable 569,547 - 569,547
Preferred stock liabilities - 574,064 574,064
$ 9,502,785 $ 5,558,349 $ 15,061,134
December 31, 2014
Non-derivative financial liabilities
Borrowings $ 9,319,983 $ 5,035,097 $ 14,355,080
Non-interest bearing liabilities 769,438 - 769,438
Bonds payable - 558,671 558,671
Preferred stock liabilities - 535,917 535,917
10,089,421 6,129,685 16,219,106
Derivative financial liabilities
Interest swap contracts 11,267 - 11,267
$ 10,100,688 $ 6,129,685 $ 16,230,373
29. TRANSACTIONS WITH RELATED PARTIES
Balances and transactions between the Corporation and its subsidiaries, which were related parties of the
Corporation, had been eliminated on consolidation and are not disclosed in this note. Details of
transactions between the Group and other related parties were disclosed below.
a. Sales of goods
For the Year Ended December 31
2015 2014
Net sales
Others $ 13,535 $ 2,641
Rental expenses (recorded under manufacturing or operation
expenses)
Others $ 3,760 $ 3,736
The price of sales to related parties and collection terms approximated those for third parties.
The Group has leased warehouse from related parties. The rent is based on the rates of neighboring
properties.
- 54 -
December 31
2015 2014
Accounts receivable
Others $ 1,899 $ 469
Other payables (recorded under other current liabilities)
Others $ 31,586 $ 35,740
b. Compensation of key management personnel
For the Year Ended December 31
2015 2014
Short-term benefits $ 48,235 $ 51,236
Post-employment benefits 480 515
$ 48,715 $ 51,751
The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.
30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY
The following assets were provided as collateral for bank borrowings and the deposit for inviting tenders:
December 31
2015 2014
Property, plant and equipment $ 1,508,880 $ 1,631,895
Restricted assets (recorded under other current assets) 32,870 -
$ 1,541,750 $ 1,631,895
31. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of
December 31, 2015 and 2014 were as follows:
a. As of December 31, 2015 and 2014, unused letters of credit for purchases of raw materials and
machinery and equipment amounted to approximately $129,914 thousand and $136,936 thousand,
respectively.
b. Unrecognized commitments are as follows:
December 31
2015 2014
Acquisition of property, plant and equipment $ 607,397 $ 889,065
- 55 -
32. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
The following information was aggregated by the foreign currencies other than functional currencies of the
group entities and the exchange rates between foreign currencies and respective functional currencies were
disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:
December 31
2015 2014
Foreign
Currencies
Exchange
Rate
New Taiwan
Dollars
Foreign
Currencies
Exchange
Rate
New Taiwan
Dollars
Financial assets of
monetary items
USD $ 45,629 32.83 $ 1,497,772 $ 15,590 31.65 $ 493,433
RMB 305,013 5.06 1,541,836 282,691 5.17 1,462,193
THB 715,285 0.91 654,202 529,672 0.96 512,194
Financial liabilities of
monetary items
USD 244,261 32.83 8,017,867 322,627 31.65 10,211,136
RMB 254,026 5.06 1,284,097 177,596 5.17 918,597
THB 131,033 0.91 119,843 153,564 0.96 148,497
EUR 2,665 35.88 95,620 11,946 38.47 459,545
The following information was aggregated by the functional currencies of the group entities, and the
exchange rates between respective functional currencies and the presentation currency were disclosed.
The significant foreign exchange gains (losses) were as follows:
For the Year Ended December 31
2015 2014
Exchange Rate
Net Foreign
Exchange Gain
(Loss) Exchange Rate
Net Foreign
Exchange Gain
(Loss)
RMB 5.10 $ (166,652) 4.93 $ (10,410)
USD 31.74 64,482 30.31 100,320
IDR 0.0024 (39,777) 0.0026 31,037
THB 0.93 33,921 0.94 6,280
$ (108,026) $ 127,227
33. SEPARATELY DISCLOSED ITEMS
a. Information about significant transactions and investees:
1) Financing provided to others. (Table1)
2) Endorsements/guarantees provided. (Table 2)
3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled
entities). (Table 3)
4) Marketable securities acquired and disposed at costs or prices at least $300 million or 20% of the
paid-in capital. (Table 4)
- 56 -
5) Acquisition of individual real estate at costs of at least $300 million or 20% of the paid-in capital.
(None)
6) Disposal of individual real estate at prices of at least $300 million or 20% of the paid-in capital.
(None)
7) Total purchases from or sales to related parties amounting to at least $100 million or 20% of the
paid-in capital. (Table 5)
8) Receivables from related parties amounting to at least $100 million or 20% of the paid-in capital.
(Table 6)
9) Trading in derivative instruments. (Note 7)
10) Intercompany relationships and significant intercompany transactions. (Table 7)
11) Information on investees. (Table 8)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business
activities, paid-in capital, method of investment, inward and outward remittance of funds,
ownership percentage, net income of investees, investment income or loss, carrying amount of the
investment at the end of the period, repatriations of investment income, and limit on the amount of
investment in the mainland China area. (Table 9)
2) Any of the following significant transactions with investee companies in mainland China, either
directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or
losses:
a) The amount and percentage of purchases and the balance and percentage of the related payables
at the end of the period. (Table 7)
b) The amount and percentage of sales and the balance and percentage of the related receivables at
the end of the period. (Table 7)
c) The amount of property transactions and the amount of the resultant gains or losses. (Table 7)
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the
end of the period and the purposes. (Table 2)
e) The highest balance, the end of period balance, the interest rate range, and total current period
interest with respect to financing of funds. (Table 1)
f) Other transactions that have a material effect on the profit or loss for the period or on the
financial position, such as the rendering or receiving of services. (Table 7)
- 57 -
34. SEGMENT INFORMATION
Information reported to the chief operating decision maker for the purpose of resource allocation and
assessment of segment performance focuses on the types of goods or services delivered or provided.
Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were as follows:
Domestic - Manufacture and sale in Taiwan.
Asia - Manufactures and sale in Asia other than Taiwan.
a. Segment revenues and results
The following was an analysis of the Group’s revenue and results from continuing operations by
reportable segment.
Domestic Asia
Adjustment and
Elimination Total
For the Year ended December 31, 2015
Revenues from external customers $ 7,129,659 $ 9,448,718 $ - $ 16,578,377
Inter-segment revenues 38,144 36,030 (74,174) -
Segment revenues $ 7,167,803 $ 9,484,748 $ (74,174) $ 16,578,377
Segment income $ 842,112 $ 422,003 $ 1,264,115
Financial costs (237,735)
Foreign exchange gain (85,678)
Other gains and losses 90,381
Profit before tax $ 1,031,083
For the Year ended December 31, 2014
Revenues from external customers $ 7,818,474 $ 9,408,000 $ - $ 17,226,474
Inter-segment revenues 32,942 41,939 (74,881) -
Segment revenues $ 7,851,416 $ 9,449,939 $ (74,881) $ 17,226,474
Segment income $ 931,447 $ 218,086 $ 1,149,533
Financial costs (245,236)
Foreign exchange gain 134,595
Other gains and losses 102,292
Profit before tax $ 1,141,184
Inter-segment revenues were accounted for according to market price.
Segment profit represented the profit before tax earned by each segment without interest income, gain
or loss on disposal of property, plant and equipment, exchange gain or loss, valuation gain or loss on
financial instruments, loss recognized on associates under equity method, finance costs and income tax
expense. This was the measure reported to the chief operating decision maker for the purpose of
resource allocation and assessment of segment performance.
- 58 -
b. Revenue from major products and services
The following is an analysis of the Group’s revenue from continuing operations from its major products
and services.
For the Year Ended December 31
2015 2014
Packaging materials $ 11,127,629 $ 10,607,356
Beverages (included bottle filling and OEM) 4,509,534 5,387,043
Others 941,214 1,232,075
$ 16,578,377 $ 17,226,474
c. Geographical information
The Group operates in three principal geographical areas –Taiwan, China and Southeast Asia.
The Group’s revenue from continuing operations from external customers by location of operations and
information about its non-current assets by location of assets are detailed below.
Revenue from
External Customers Non-current Assets
For the Year Ended December 31 December 31
2015 2014 2015 2014
Taiwan $ 7,129,659 $ 7,818,474 $ 4,936,183 $ 5,120,572
China 5,965,495 5,907,078 10,174,536 10,855,694
Southeast Asia 2,387,637 2,660,097 5,684,070 5,046,044
Others 1,095,586 840,825 - -
$ 16,578,377 $ 17,226,474 $ 20,794,789 $ 21,022,310
Non-current assets exclude financial instruments and deferred tax assets.
d. Information on major customers
Single customers that contributed 10% or more to the Group’s revenue were as follows:
For the Year Ended December 31
Names 2015 2014
Customer A $ 2,962,749 $ 4,564,681
Customer B 2,244,800 2,320,598
- 59 -
TABLE 1
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
FINANCING PROVIDED TO RELATED ENTITIES
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands of Dollars, Unless Otherwise Specified)
No. Lender Borrower Financial
Statement Account
Related
Parties
Highest Balance for
the Period Ending Balance
Actual Borrowing
Amount
(Note 5)
Interest Rate Nature of
Financing
Business
Transaction
Amounts
Reasons for
Short-term
Financing
Allowance for
Impairment Loss
Collateral Financing Limit for
Each Borrower
(Notes 1 and 3)
Aggregate
Financing Limits
(Notes 2 and 3) Item Value
1 Samoa Hon Chuan Suzhou Hongxin Receivable from
related parties
Yes $ 131,300
( US$ 4,000 )
$ -
$ - 1.83%-2.54% Short-term
financing
$ - Operating
Capital
$ - - $ - $ 3,951,742 $ 3,951,742
Hon Chuan China Receivable from
related parties
Yes 3,094,839
( US$ 94,283 )
2,969,021
( US$ 90,450 )
2,969,021
( US$ 90,450 )
1.82%-2.16% Short-term
financing
- Operating
Capital
- - - 3,951,742 3,3951,742
Zangzhou Hon Chuan Receivable from related parties
Yes 131,300 ( US$ 4,000 )
- - 2.33%-2.54% Short-term financing
- Operating Capital
- - - 3,951,742 3,3951,742
Taiyuan Hon Chuan Receivable from
related parties
Yes 259,318
( US$ 7,900 )
- - 1.83%-2.54% Short-term
financing
- Operating
Capital
- - - 3,951,742 3,3951,742
Qingxin Hon Chuan Receivable from
related parties
Yes 65,650
( US$ 2,000 )
- - 1.83%-2.54% Short-term
financing
- Operating
Capital
- - - 3,951,742 3,3951,742
Kai Gang Receivable from related parties
Yes 262,600 ( US$ 8,000 )
98,475 ( US$ 3,000 )
98,475 ( US$ 3,000 )
1.82%-2.16% Short-term financing
- Operating Capital
- - - 3,951,742 3,3951,742
Samoa Hong Hsing Receivable from
related parties
Yes 98,475
( US$ 3,000 )
98,475
( US$ 3,000 )
98,475
( US$ 3,000 )
1.82%-2.16% Short-term
financing
- Operating
Capital
- - - 3,951,742 3,3951,742
Chuzhou Hon Chuan
Receivable from
related parties
Yes 131,300
( US$ 4,000 )
131,300
( US$ 4,000 )
131,300
( US$ 4,000 )
2.33%-2.66% Short-term
financing
- Operating
Capital
- - - 3,951,742 3,3951,742
Xiantao Hon Chuan Receivable from related parties
Yes 131,300 ( US$ 4,000 )
98,475 ( US$ 3,000 )
98,475 ( US$ 3,000 )
2.38%-2.66% Short-term financing
- Operating Capital
- - - 3,951,742 3,3951,742
2 Kai Gang Qingxin Hon Chuan
Receivable from related parties
Yes 590,850 ( US$ 18,000 )
393,900 ( US$ 12,000 )
393,900 ( US$ 12,000 )
1.83%-2.66% Short-term financing
- Operating Capital
- - - 2,240,428 2,240,428
Hon Chuan China Receivable from
related parties
Yes 636,805
( US$ 19,400 )
636,805
( US$ 19,400 )
636,805
( US$ 19,400 )
1.82%-2.16% Short-term
financing
- Operating
Capital
- - - 2,240,428 2,240,428
Zangzhou Hon Chuan Receivable from
related parties
Yes 164,125
( US$ 5,000 )
- - 1.83%-2.66% Short-term
financing
- Operating
Capital
- - - 2,240,428 2,240,428
3 Samoa Hong Hsing
Hon Chuan China Receivable from
related parties
Yes 525,200
( US$ 16,000 )
525,200
( US$ 16,000 )
525,200
( US$ 16,000 )
1.82%-2.16% Short-term
financing
- Operating
Capital
- - - 2,121,516 2,121,516
Taiyuan Hon Chuan
Receivable from related parties
Yes 65,650 ( US$ 2,000 )
- - 1.83%-2.54% Short-term financing
- Operating Capital
- - - 2,121,516 2,121,516
4 Hon Chuan Asia Hon Chuan Indonesia
Receivable from
related parties
Yes 144,430
( US$ 4,400 )
144,430
( US$ 4,400 )
144,430
( US$ 4,400 )
1.74%-2.42% Short-term
financing
- Operating
Capital
- - - 2,255,669 2,255,669
Hon Chuan Vietnam
Receivable from
related parties
Yes 32,825
( US$ 1,000 )
- - 1.74%-2.33% Short-term
financing
- Operating
Capital
- - - 2,255,669 2,255,669
Hon Chuan Malaysia Receivable from
related parties
Yes 49,238
( US$ 1,500 )
- - 1.74%-2.28% Short-term
financing
- Operating
Capital
- - - 2,255,669 2,255,669
Honly Receivable from
related parties
Yes 30,279
( US$ 922 )
30,279
( US$ 922 )
30,279
( US$ 922 )
2.42% Short-term
financing
- Operating
Capital
- - - 2,255,669 2,255,669
5 Suzhou Hon Chuan Qingxin Hon Chuan
Receivable from
related parties
Yes 25,275
( RMB 5,000 )
25,275
( RMB 5,000 )
25,275
( RMB 5,000 )
4.35% Short-term
financing
- Operating
Capital
- - - 482,400 482,400
Xiantao Hon Chuan Receivable from
related parties
Yes 63,188
( RMB 12,500 )
63,188
( RMB 12,500 )
63,188
( RMB 12,500 )
4.35% Short-term
financing
- Operating
Capital
- - - 482,400 482,400
Zangzhou Hon Chuan
Receivable from related parties
Yes 20,220 ( RMB 4,000 )
20,220 ( RMB 4,000 )
20,220 ( RMB 4,000 )
4.35% Short-term financing
- Operating Capital
- - - 482,400 482,400
Chuzhou Hon Chuan
Receivable from
related parties
Yes 26,792
( RMB 5,300 )
26,792
( RMB 5,300 )
26,792
( RMB 5,300 )
4.35% Short-term
financing
- Operating
Capital
- - - 482,400 482,400
6 Changsha Hon
Chuan
Qingxin Hon Chuan
Receivable from
related parties
Yes 227,475
( RMB 45,000 )
227,475
( RMB 45,000 )
227,475
( RMB 45,000 )
4.35% Short-term
financing
- Operating
Capital
- - - 440,976 440,976
Zangzhou Hon Chuan
Receivable from
related parties
Yes 10,110
( RMB 2,000 )
10,110
( RMB 2,000 )
10,110
( RMB 2,000 )
4.35% Short-term
financing
- Operating
Capital
- - - 440,976 440,976
Chuzhou Hon Chuan
Receivable from related parties
Yes 80,880 ( RMB 16,000 )
80,880 ( RMB 16,000 )
80,880 ( RMB 16,000 )
4.35% Short-term financing
- Operating Capital
- - - 440,976 440,976
(Continued)
- 60 -
No. Lender Borrower Financial
Statement Account
Related
Parties
Highest Balance for
the Period Ending Balance
Actual Borrowing
Amount
(Note 5)
Interest Rate Nature of
Financing
Business
Transaction
Amounts
Reasons for
Short-term
Financing
Allowance for
Impairment Loss Collateral
Financing Limit for
Each Borrower
(Notes 1 and 3)
Aggregate
Financing Limits
(Notes 2 and 3)
7 Suzhou Hongxin
(Note 3)
Xiantao Hon Chuan Receivable from
related parties
Yes $ 22,242
( RMB 4,400 )
$ 22,242
( RMB 4,400 )
$ 22,242
( RMB 4,400 )
4.35% Short-term
financing
$ - Operating
Capital
$ - - $ - $ 480,859 $ 480,859
8 Jinan Hon Chuan
(Note 3)
Qingxin Hon Chuan
(Note 3)
Receivable from
related parties
Yes 156,705
( RMB 31,000 )
156,705
( RMB 31,000 )
156,705
( RMB 31,000 )
4.35% Short-term
financing
- Operating
Capital
- - - 508,148 508,148
Zangzhou Hon Chuan
(Note 3)
Receivable from
related parties
Yes 65,715
( RMB 13,000 )
65,715
( RMB 13,000 )
65,715
( RMB 13,000 )
4.35% Short-term
financing
- Operating
Capital
- - - 508,148 508,148
Xiantao Hon Chuan Receivable from related parties
Yes 27,803 ( RMB 5,500 )
27,803 ( RMB 5,500 )
27,803 ( RMB 5,500 )
4.35% Short-term financing
- Operating Capital
- - - 508,148 508,148
Note 1: The financing for operation should not exceed the amount of transaction amounts; the short-term financing should not exceed 40% of the latest net assets of the subsidiaries.
Note 2: The maximum amount is 40% of the latest net assets of the subsidiaries
Note 3: Offshore subsidiaries whose voting share are 100% held, directly or indirectly, by the Company will not be subjected to the restriction on 40% of the latest net assets of the Company.
Note 4: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
Note 5: Significant intercompany accounts and transactions have been eliminated. (Concluded)
- 61 -
TABLE 2
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands of Dollars, Unless Otherwise Specified)
No. Endorser/Guarantor
Endorsee/Guarantee Limits on
Endorsement/
Guarantee Given
on Behalf of
Each Party
(Notes 1 and 3)
Maximum
Amount
Endorsed/
Guaranteed
During the
Period
Outstanding
Endorsement/
Guarantee at the
End of the Period
Actual
Borrowing
Amount
Amount
Endorsed/
Guaranteed by
Collaterals
Ratio of
Accumulated
Endorsement/
Guarantee to Net
Equity In Latest
Financial
Statements (%)
Aggregate
Endorsement/
Guarantee Limit
(Notes 2 and 3)
Endorsement/
Guarantee Given
by Parent on
Behalf of
Subsidiaries
Endorsement/
Guarantee Given
by Subsidiaries
on Behalf of
Parent
Endorsement/
Guarantee Given
On behalf of
Companies in
Mainland China
Name Relationship
0 The Corporation Samoa Hon Chuan (Note 4) $ 6,241,371 $ 3,216,850
(US$ 98,000)
$ 3,216,850
(US$ 98,000)
$ 2,842,645
(US$ 86,600)
$ - 26 $ 12,482,742 Y - -
Hon Chuan China (Note 4) 6,241,371 3,380,975
(US$ 103,000)
3,380,975
(US$ 103,000)
2,226,520
(US$ 67,830)
- 27 12,482,742 Y - -
Hon Chuan Asia (Note 4) 6,241,371 1,871,025
(US$ 57,000)
1,871,025
(US$ 57,000)
1,246,821
(US$ 37,984)
- 15 12,482,742 Y - -
Qingxin Hon Chuan (Note 4) 6,241,371 98,475
(US$ 3,000)
98,475
(US$ 3,000)
- - 1 12,482,742 Y - Y
Taiyuan Hon Chuan (Note 4) 6,241,371 164,125
(US$ 5,000)
164,125
(US$ 5,000)
114,888
(US$ 3,500)
- 1 12,482,742 Y - Y
Samoa Hon Hsing (Note 4) 6,241,371 623,675
(US$ 19,000)
623,675
(US$ 19,000)
449,703
(US$ 13,700)
- 5 12,482,742 Y - -
Kai Gang (Note 4) 6,241,371 1,148,875
(US$ 35,000)
1,148,875
(US$ 35,000)
525,200
(US$ 16,000)
- 9 12,482,742 Y - -
Suzhou Hongxin (Note 4) 6,241,371 164,125
(US$ 5,000)
164,125
(US$ 5,000)
114,888
(US$ 3,500)
- 1 12,482,742 Y - Y
Jinan Hon Chuan (Note 4) 6,241,371 328,250
(US$ 10,000)
328,250
(US$ 10,000)
246,188
(US$ 7,500)
- 3 12,482,742 Y - Y
Xiantao Hon Chuan (Note 4) 6,241,371 164,125
(US$ 5,000)
164,125
(US$ 5,000)
- - 1 12,482,742 Y - Y
1 Suzhou Hon Chuan Changsha Hon Chuan (Note 4) 6,241,371 151,650
(RMB 30,000)
- - - - 12,482,742 - - Y
Jinan Hon Chuan (Note 4) 6,241,371 101,100
(RMB 20,000)
- - - - 12,482,742 - - Y
2 Suzhou Hongxin Suzhou Hon Chuan (Note 4) 6,241,371 50,550
(RMB 10,000)
50,550
(RMB 10,000)
- - - 12,482,742 - - Y
3 Changsha Hon Chuan Jinan Hon Chuan (Note 4) 6,241,371 101,100
(RMB 20,000)
- - - - 12,482,742 - - Y
Suzhou Hon Chuan (Note 4) 6,241,371 101,100
(RMB 20,000)
- - - - 12,482,742 - - Y
4 Jinan Hon Chuan Suzhou Hon Chuan (Note 4) 6,241,371 101,100
(RMB 20,000)
- - - - 12,482,742 - - Y
Changsha Hon Chuan (Note 4) 6,241,371 151,650
(RMB 30,000)
- - - - 12,482,742 - - Y
Continued)
- 62 -
No. Endorser/Guarantor
Endorsee/Guarantee Limits on
Endorsement/
Guarantee Given
on Behalf of
Each Party
(Notes 1 and 3)
Maximum
Amount
Endorsed/
Guaranteed
During the
Period
Outstanding
Endorsement/
Guarantee at the
End of the Period
Actual
Borrowing
Amount
Amount
Endorsed/
Guaranteed by
Collaterals
Ratio of
Accumulated
Endorsement/
Guarantee to Net
Equity In Latest
Financial
Statements (%)
Aggregate
Endorsement/
Guarantee Limit
(Notes 2 and 3)
Endorsement/
Guarantee Given
by Parent on
Behalf of
Subsidiaries
Endorsement/
Guarantee Given
by Subsidiaries
on Behalf of
Parent
Endorsement/
Guarantee Given
On behalf of
Companies in
Mainland China
Name Relationship
5 Suzhou Hon Chuan, two
subsidiaries
Suhou Hongxin, two subsidiaries (Note 4) $ 6,241,371 $ 75,825
(RMB 15,000)
$ - $ - $ - - $ 12,482,742 - - Y
6 Hon Chuan Thailand Hon Fu Thailand (Note 4) 6,241,371 54,876
(THB 60,000)
54,876
(THB 60,000)
18,424
(THB 20,144)
- - 12,482,742 - - -
Note 1: The maximum is 50% of the net assets of the Corporation and subsidiaries in the latest financial report.
Note 2: The maximum is 100% of the net assets of the Corporation and subsidiaries in the latest financial report.
Note 3: The maximum amount of the total guarantee for all group entities is 100% of the net assets of the Corporation and subsidiaries.
Note 4: Investees which the Corporation directly and indirectly holds more than 50% percent of the voting shares.
Note 5: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
(Concluded)
- 63 -
TABLE 3
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELD
DECEMBER 31, 2015
(In Thousands of Dollars, Unless Otherwise Specified)
Holding Company Name Type and Name of Marketable Securities Relationship with the
Holding Company Financial Statement Account
December 31, 2015
Shares Carrying Value
Percentage of
Ownership
(Note 1)
Fair Value (Note 1)
The Corporation Capital Stock
Globaltec Technology Partner Venture Capital Corp. - Financial assets measured at cost -
noncurrent
644,656 $ 1,446 2 $ 1,446
Lightel Technologies Inc. - Financial assets measured at cost -
noncurrent
551,051 8,645 2 8,645
CDIB CME Fund Ltd. - Financial assets measured at cost -
noncurrent
3,000,000 30,000 2 30,000
Samoa Hon Chuan Corporate Bonds
Green Fresh - Debt investments with no active
market - current
- 40,440
( US$ 1,232 )
- 40,440
( US$ 1,232 )
Hon Chuan Thailand Capital Stock
Ichitan Company - Available-for-sale financial assets -
noncurrent
1,000,000 11,250
( THB 12,300 )
0.08 11,250
( THB 12,300 )
Note 1: The fair value of the securities held was based on cost as established at the date of acquisition.
Note 2: Information on investees, please see Tables 8 and 9.
Note 3: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
- 64 -
TABLE 4
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands, Except Number of Shares)
Company Name Type and Name of
Marketable Securities Financial Statement Account Counterparty Relationship
Beginning Balance Acquisition Ending Balance
Shares Amount (Note 1) Shares Amount Shares Amount
(Notes 1 and 3)
The Corporation Samoa Hon Chuan Investments accounted for using equity
method
- Parent - subsidiary 252,196,725 $ 9,640,422 25,000,000 $ 770,617 277,196,725 $ 9,853,487
Samoa Hon Chuan Hon Chuan Asia Investments accounted for using equity
method
- Parent - subsidiary 132,022,505 5,421,804
( US$ 165,173 )
26,700,000 876,428
( US$ 26,700 )
158,722,505 5,983,374
( US$ 182,281 )
Note 1: Amount includes investment income/loss recognized under equity method and cumulative translation adjustment.
Note 2: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
Note 3: Significant intercompany accounts and transactions have been eliminated.
- 65 -
TABLE 5
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND INVESTEES
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands of New Taiwan Dollars)
Purchaser or Seller Related Party Nature of Relationship
with the Purchaser or Seller
Transaction Details Abnormal Transaction Notes and Accounts
Receivable (Payable) Note
Purchase
or Sale
Amount
(Note)
% to
Total Collection Terms Unit Price Collection Terms
Ending
Balance
%
to Total
Hon Chuan Thailand Hon Chuan Asia Parent - subsidiary (Sale) $ (258,326) (16 ) T/T 180 days $ - - $ 53,191 16
Hon Chuan Asia Hon Chuan Thailand Parent - subsidiary Purchase 258,326 26 T/T 180 days - - (53,191) (57 )
Note: Significant intercompany accounts and transactions have been eliminated.
- 66 -
TABLE 6
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
RECEIVABLE FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2015
(In Thousands of Dollars, Unless Otherwise Specified)
Company Name Related Party Relationship Ending Balance
(Note 2)
Turnover
Rate
Overdue Amount Received in
Subsequent Period
Allowance for
Impairment Loss Amount Action Taken
Samoa Hon Chuan Hon Chuan China (Note 1) $ 2,969,021
( US$ 90,450 )
- $ - Depend on the operation $ - $ -
Chuzhou Hon Chuan (Note 1) 131,300
( US$ 4,000 )
- - Depend on the operation - -
Kai Gang Qingxin Hon Chuan (Note 1) 393,900
( US$ 12,000 )
- - Depend on the operation - -
Hon Chuan China (Note 1) 636,805
( US$ 19,400 )
- - Depend on the operation - -
Samoa Hon Hsing Hon Chuan China (Note 1) 525,200
( US$ 16,000 )
- - Depend on the operation - -
Hon Chuan Asia Hon chuan Indonesia (Note 1) 144,430
( US$ 4,400 )
- - Depend on the operation - -
Changsha Hon Chuan Qingxin Hon chuan (Note 1) 227,475
( RMB 45,000 )
- - Depend on the operation 35,385
( RMB 7,000 )
-
Jinan Hon Chuan Qingxin Hon chuan (Note 1) 156,705
( RMB 31,000 )
- - Depend on the operation - -
Hon Chuan Asia Hon Chuan Myanmar (Note 1) 362,154
( US$ 11,033 )
- - Depend on the operation - -
Samoa Honly Cambodia Honly (Note 1) 138,307
( US$ 4,213 )
- - Depend on the operation - -
Hon Chuan China Xiantao Hon Chuan (Note 1) 329,324
( US$ 10,033 )
- - Depend on the operation - -
Note 1: Please see Note 13.
Note 2: Significant intercompany accounts and transactions have been eliminated.
- 67 -
TABLE 7
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands)
No. Investee Company Counterparty Relationship
(Note 1)
Transaction Details
Financial Statement Account Amount Payment Terms
% to
Total Sales or
Assets
0 The Corporation Hon Chuan Asia and its subsidiaries 1 Sales $ 30,821 T/T 180 days -
Hon Chuan Asia and its subsidiaries 1 Purchase 30,293 T/T 180 days -
Hon Chuan Asia and its subsidiaries 1 Technical service revenue 25,747 Depend on working capital sufficiency -
Hon Chuan China and its subsidiaries 1 Sales 7,323 T/T 180 days -
Hon Chuan China and its subsidiaries 1 Purchase 5,738 T/T 180 days -
Hon Chuan China and its subsidiaries 1 Technical service revenue 22,529 Depend on working capital sufficiency -
1 Samoa Hon Chuan Hon Chuan China and its subsidiaries 3 Receivable from related parties 3,395,746 Depend on working capital sufficiency 12
Hon Chuan China and its subsidiaries 3 Interest receivable 17,966 Depend on working capital sufficiency -
Hon Chuan China and its subsidiaries 3 Interest revenue 74,692 Depend on working capital sufficiency -
2 Hon Chuan Asia Among Hon Chuan Asia’s subsidiaries 3 Receivable from related parties 174,709 Depend on working capital sufficiency 1
Among Hon Chuan Asia’s subsidiaries 3 Accounts receivable 475,332 T/T 180 days 2
Among Hon Chuan Asia’s subsidiaries 3 Accounts Payable 76,303 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Purchase 404,210 T/T 180 days 2
Among Hon Chuan Asia’s subsidiaries 3 Sales 626,716 T/T 180 days 4
Among Hon Chuan Asia’s subsidiaries 3 Realized gross profit 10,354 - -
Hon Chuan China and its subsidiaries 3 Purchase 6,169 T/T 180 days -
3 Hon Chuan Thailand Among Hon Chuan Asia’s subsidiaries 3 Accounts receivable 16,757 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Sales 3,373 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Purchase 83,887 T/T 180 days 1
Among Hon Chuan Asia’s subsidiaries 3 Accounts Payable 22,742 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Other income 14,060 Depend on working capital sufficiency -
4 Hon Fu Thailand Among Hon Chuan Asia’s subsidiaries 3 Accounts receivable 20,793 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Sales 23,268 T/T 180 days -
5 Hon Chuan Malaysia Among Hon Chuan Asia’s subsidiaries 3 Sales 23,552 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Purchase 1,323 T/T 180 days -
6 Hon Chuan Indonesia Among Hon Chuan Asia’s subsidiaries 3 Purchase 4,989 T/T 180 days -
7 Hon Chuan Vietnam Among Hon Chuan Asia’s subsidiaries 3 Sales 8,681 T/T 180 days -
8 Samoa Honly Among Hon Chuan Asia’s subsidiaries 3 Sales 14,923 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Other unearned revenue 122,525 Depend on working capital sufficiency -
Among Hon Chuan Asia’s subsidiaries 3 Purchase 8,766 T/T 180 days -
Among Hon Chuan Asia’s subsidiaries 3 Accounts Receivable 15,782 T/T 180 days -
(Continued)
- 68 -
No. Investee Company Counterparty Relationship
(Note 1)
Transaction Details
Financial Statement Account Amount Payment Terms
% to
Total Sales or
Assets
9 Hon Chuan China Nibno Hon Chuan 3 Accounts payable $ 58,905 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Other receivable 329,324 Depend on working capital sufficiency 1
Among Hon Chuan China’s subsidiaries 3 Payable from related parties 1,162,005 Depend on working capital sufficiency 4
Among Hon Chuan China’s subsidiaries 3 Realized gross profit 16,852 - -
Among Hon Chuan China’s subsidiaries 3 Interest expense 22,331 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Sales of property, plant and equipment 43,862 Depend on working capital sufficiency -
10 Kai Gang Among Hon Chuan China’s subsidiaries 3 Receivable from related parties 393,900 Depend on working capital sufficiency 1
Among Hon Chuan China’s subsidiaries 3 Interest revenue 16,689 Depend on working capital sufficiency -
11 Suzhou Hon Chuan Among Hon Chuan China’s subsidiaries 3 Sales 70,555 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Purchase 19,223 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Other receivable 30,330 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Manufacturing expense 31,208 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Purchase of property, plant and equipment 15,794 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Receivable from related parties 135,474 Depend on working capital sufficiency -
12 Suzhou Hongxing Among Hon Chuan China’s subsidiaries 3 Purchase 20,456 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Sales 74 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Receivable from related parties 22,242 Depend on working capital sufficiency -
13 Jinan Hon Chuan Among Hon Chuan China’s subsidiaries 3 Sales 7,107 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Purchase 52,685 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Other revenue 12,794 Depend on working capital sufficiency -
Among Hon Chuan China’s subsidiaries 3 Receivable from related parties 250,222 Depend on working capital sufficiency 1
14 Taiyuan Hon Chuan Among Hon Chuan China’s subsidiaries 3 Purchase 3,943 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Sales 21,814 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Sales of property, plant and equipment 44,220 Depend on working capital sufficiency -
15 Changsha Hon Chuan Among Hon Chuan China’s subsidiaries 3 Sales 1,322 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Other receivable 13,299 Depend on working capital sufficiency
Among Hon Chuan China’s subsidiaries 3 Purchase 1 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Receivable from related parties 318,464 Depend on working capital sufficiency 1
16 Qingxin Hon Chuan Among Hon Chuan China’s subsidiaries 3 Purchase 6,064 T/T 180 days -
Among Hon Chuan China’s subsidiaries 3 Sales 22,826 T/T 180 days -
17 Zangzhou Hon Chuan Among Hon Chuan China’s subsidiaries 3 Purchase 2,539 T/T 180 days -
Note 1: Relationship of counterparty; (1) parent company to subsidiary; (2) subsidiary to parent company; (3) subsidiary to subsidiary.
Note 2: Significant intercompany accounts and transactions have been eliminated.
(Concluded)
- 69 -
TABLE 8
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
INFORMATION ON INVESTEES
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands of Dollars, Unless Stated Otherwise)
Investor Company Investee Company Location Main Businesses and Products
Original Investment Amount As of December 31, 2015 Net Income
(Loss) of the
Investee
Share of Profits
(Loss)
(Note 4)
Note December 31,
2015
December 31,
2014 Shares %
Carrying
Amount
(Note 4)
The Corporation Samoa Hon Chuan Samoa Overseas reinvested holding company and
international trade
$ 8,477,415 $ 7,706,796 277,196,725 100 $ 9,853,487 $ 180,301 $ 180,301 Subsidiary
Samoa Hon Chuan Hon Chuan China Cayman Island Overseas reinvested holding company 3,681,849
(US$ 112,166)
3,681,849
(US$ 112,166)
91,230,576 76.84 3,734,238
(US$ 113,762)
(238,487)
(US$ 7,514)
(Note 1) Indirect subsidiary
Hon Chuan Asia Cayman Island Overseas reinvested holding company and
international trade
5,266,345
(US$ 160,437)
4,389,917
(US$ 133,737)
158,722,505 100 5,983,374
(US$ 182,281)
338,147
(US$ 10,654)
(Note 1) Indirect subsidiary
Hon Chuan China Kai Gang Hong Kong Overseas reinvested holding company 4,610,600
(US$ 140,460)
4,610,600
(US$ 140,460)
1,097,377,292 100 5,458,633
(US$ 166,295)
(76,142)
(US$ 2,399)
(Note 1) Indirect subsidiary
Samoa Hong Hsing Samoa Overseas reinvested holding company 4,136,147
(US$ 126,006)
4,136,147
(US$ 126,006)
126,006,000 100 5,170,594
(US$ 157,520)
(33,643)
(US$ 1,060)
(Note 1) Indirect subsidiary
Hon Chuan Asia Hon Chuan Thailand Thailand Manufacture and sale of plastic caps and PET
bottles
1,362,172
(US$ 41,498)
1,362,172
(US$ 41,498)
137,000,000 100 2,242,637
(US$ 68,321)
227,854
(US$ 7,179)
(Note 1) Indirect subsidiary
Hon Chuan Indonesia Indonesia Manufacture and sale of plastic caps and PET
bottles
2,594,357
(US$ 79,036)
2,342,228
(US$ 71,355)
78,984,413 100 2,198,848
(US$ 66,987)
(70,334)
(US$ 2,216)
(Note 1) Indirect subsidiary
Hon Chuan Vietnam Vietnam Manufacture and sale of plastic caps and PET
bottles
820,625
(US$ 25,000)
656,500
(US$ 20,000)
- 100 935,545
(US$ 28,501)
119,116
(US$ 3,753)
(Note 1) Indirect subsidiary
Hon Chuan Malaysia Malaysia Manufacture and sale of plastic caps and PET
bottles
856,700
(US$ 26,099)
856,700
(US$ 26,099)
81,259,900 100 659,060
(US$ 20,078)
46,720
(US$ 1,472)
(Note 1) Indirect subsidiary
Hon Chuan Myanmar Myanmar Manufacture and sale of plastic caps and PET
bottles
275,730
(US$ 8,400)
137,865
(US$ 4,200)
89,720,368 70 181,686
(US$ 5,535)
(5,745)
(US$ 181)
(Note 1) Indirect subsidiary
Samoa Honly Samoa Overseas reinvested holding company and
international trade
230,432
(US$ 7,020)
- 7,020,000 60 208,701
(US$ 6,358)
(32,374)
(US$ 1,020)
(Note 1) Indirect subsidiary
Honly Cambodia Overseas reinvested holding company and
international trade
28,952
(US$ 882)
- 490 49 28,295
(US$ 862)
(1,397)
(US$ 44)
(Note 1) Indirect subsidiary
Hon Chuan Thailand Hon Fu Thailand Thailand Manufacture and sale of plastic caps, labels, pp
bottles and PET bottles
115,845
(THB 126,662)
115,845
(THB 126,662)
12,666,225 65 250,224
(THB 273,589)
20,855
(THB 22,365)
(Note 1) Indirect subsidiary
Samoa Honly Cambodia Honly Cambodia Beverage packaging service 196,950
(US$ 6,000)
- 6,000,000 100 163,009
(US$ 4,966)
(30,914)
(US$ 974)
(Note 1) Indirect subsidiary
Note 1: Not applicable.
Note 2: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
Note 3: Information on investments in mainland China, please see Table 9.
Note 4: Significant intercompany accounts and transactions have been eliminated.
- 70 -
TABLE 9
TAIWAN HON CHUAN ENTERPRISE CO., LTD. AND SUBSIDIARIES
INFORMATION ON INVESTMENTS IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2015
(In Thousands of Dollars, Unless Otherwise Specified)
Investee Company Main Businesses and Products Paid-in Capital Method of
Investment
Accumulated
Outward Remittance
for Investment from
Taiwan as of
January 1, 2015
Remittance of Funds Accumulated
Outward Remittance
for Investment from
Taiwan as of
December 31, 2015
Net Income (Loss) of
the Investee
(Note 3)
% Ownership of
Direct or Indirect
Investment
(Note 1)
Investment
Gain (Loss)
(Notes 3 and 7)
Carrying Amount as
of December 31, 2015
(Notes 3 and 7)
Accumulated
Repatriation of
Investment Income as
of December 31, 2015 Outward Inward
Suzhou Hon Chuan Manufacture and sale of various plastic
caps, labels and aluminum closures
$ 672,584
( US$ 20,490 )
(Note 1) $ 493,491
( US$ 15,034 )
$ - $ - $ 493,491
( US$ 15,034 )
$ (33,612 ) 76.84% $ (25,827 ) $ 910,768 $ -
Qingxin Hon Chuan Manufacture and sale of various plastic caps, labels, PET bottles and beverage
packaging services
1,739,725
( US$ 53,000 )
(Note 1) 298,904
(US$ 9,106 )
- - 298,904
(US$ 9,106 )
(190 ) 76.84% (146 ) 1,445,061 -
Zhangzhou Hon Chuan Development, manufacture and sales of beverages
1,313,000
( US$ 40,000 )
(Note 1) 96,735
(US$ 2,947 )
- - 96,735
(US$ 2,947 )
10,569 76.84% 8,121 959,069 -
Suzhou Hongxin Manufacture and sale of plastic caps, PET
bottles and beverage packaging services
1,509,950
( US$ 46,000 )
(Note 1) 734,131
(US$ 22,365 )
- - 734,131
(US$ 22,365 )
(158,028 ) 76.84% (121,429 ) 922,345 -
Jinan Hon Chuan Manufacture and sale of plastic caps and
PET bottles
951,925
( US$ 29,000 )
(Note 1) 121,617
(US$ 3,705 )
- - 121,617
(US$ 3,705 )
89,377 76.84% 68,677 971,554 -
Changsha Hon Chuan Manufacture and sale of plastic caps, PET
bottles and beverage packaging services
607,263
( US$ 18,500 )
(Note 1) 192,584
(US$ 5,867 )
- - 192,584
(US$ 5,867 )
9,553 76.84% 7,341 849,426 -
Taiyuan Hon Chuan Manufacture and sale of plastic caps, PET bottles and beverage packaging services
1,083,225
( US$ 33,000 )
(Note 1) 248,551
(US$ 7,572 )
- - 248,551
(US$ 7,572 )
21,424 76.84% 16,462 1,243,102 -
Ningbo Hon Chuan Manufacture and sale of packing materials
for electronic components and caps for batteries
114,888
( US$ 3,500 )
(Note 1) 114,888
( US$ 3,500 )
- - 114,888
( US$ 3,500 )
1,206 100% 1,206 70,968 -
Chuzhou Hon Chuan Manufacture and sale of various plastic
caps and PET bottles
328,250
( US$ 10,000 )
(Note 1) - - - - (31,263 ) 76.84% (24,022 ) 203,245 -
Xiantao Hon Chuan Manufacture and sale of various plastic
caps and PET batteries
492,375
( US$ 15,000 )
(Note 1) - - - - (40,118 ) 76.84% (30,827 ) 319,395 -
Danmao Company Manufacture and sale of various plastic caps and PET bottles
151,650
( RMB 30,000 )
(Note 2) - - - - (36,903 ) 25.61% (9,451 ) 24,972 -
Quanhe Equity investment 30,330
( RMB 6,000 )
(Note 6) - - - - (1,140 ) 76.84% (876 ) 22,437 -
Anyang Hon Chuan Sale of PE/PET packaging food packaging 75,825
( RMB 15,000 )
(Note 6) - - - - (2,845 ) 76.84% (515 ) 56,097 -
Accumulated Outward Remittance for Investment in
Mainland China as of December 31, 2015
Investment Amounts Authorized by Investment Commission,
MOEA
Upper Limit on the Amount of Investment Stipulated by
Investment Commission, MOEA
$ 2,300,901 (US$70,096) $7,258,691(US$221,133) (Note 4)
Note 1: The Corporation invested in China through third parties.
Note 2: The Corporation invested in China through Suzhou Hon Chuan.
Note 3: The Corporation recognized its equity in the investee’s net income on the basis of financial statements audited by the CPA member firm of the Corporation’s auditors, except those of Ningbo Hon Chuan.
Note 4: The regulation refers to “Regulations for Screening of Application to Engage in Technical Cooperation in Mainland China” issued by the Investment Commission of the Ministry of Economic Affairs.
Note 5: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates prevailing on December 31, 2015.
Note 6: The Corporation invested in China through Suzhou Hongxin. In November 2015, the ownership of Anyang Hon Chuan was increased from 40% to 100%.
Note 7: Significant intercompany accounts and transactions have been eliminated, except those of Danmao Company.